Superannuation funds in trouble for over-charging members

Between 2012 and 2016, insurance premiums reduced, and insurers’ bottom lines plummeted. After recent regulatory changes to save the insurance industry, insurance premiums have increased dramatically and often, and trustees have struggled to get quotes from insurers unwilling to compete for tenders.

APRA* is concerned about the effect these changes are having on members’ experience and outcome. They have written to many superannuation funds criticising their practices.

Their concerns aren’t just about the already increased premiums, but that premiums may be hiked up further after guarantee or contract periods end, so that insurers can keep to the prices they have tendered.

Group insurance is particularly effected. APRA found that Superannuation funds are wrongly defaulting members into group categories with no evidence that increased premiums will be reflected in better quality cover.

After widespread criticism from the prudential regulator, some funds such as AustralianSuper (underwritten by TAL) are making changes to amend work-cover ratings to lower premiums for some members.

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*The Australian Prudential Regulation Authority (APRA) is an independent statutory authority that supervises institutions across banking, insurance and superannuation and promotes financial system stability in Australia.