Australia’s largest super fund is raising insurance premiums amid rising mental health and disability claims, potentially affecting members’ long-term savings. Ashley Smith explains why now is the time to review your cover to keep it cost-effective and suitable for your needs.
Australia’s largest super fund is sharply increasing insurance premiums by up to 40% for nearly half its members as rising mental health and disability claims push up the cost of cover.
The premium increase’s true impact will be the significant reduction it has on longer-term retirement savings for around 1.7 million members holding insurance through the fund.
Currently, the fund manages about $410 billion in assets and has benefited from years of declining or steady insurance expenses, which made basic cover seem good value for many workers. That period is ending as new claims data - especially from younger individuals unable to work due to mental health issues - has drastically increased costs for total and permanent disability, death, and income protection across the industry.
The average price for total and permanent disability cover is going up by about 40% annually, while death cover rises nearly 20%, and two-year income protection jumps roughly 38%, varying by member type.
For example, a 45-year-old white-collar worker will pay around $236 per year for basic cover, compared to $526 for someone the same age in a blue-collar job.
Out of 3.6 million members, only about 1.7 million actually use this insurance through their superannuation. According to industry groups, mental health-related total and permanent disability claims via group policies have doubled from $1.2 billion in 2019 to $2.4 billion in 2024 and now represent about one-third of such claims, putting clear strain on both affordability and the long-term sustainability of the system.
Other funds are heading in the same direction with CareSuper informing its members of premium increases for the first time in three years, although theirs are closer to 10%.
Insurers cooperating with super funds emphasise that group life cover has typically been more affordable than retail insurance bought through advisers, however, given these ongoing claims trends, this surge in premiums seems to indicate a lasting adjustment rather than a single correction – along with the fact that retail cover is often more comprehensive.
Many people continue to hold insurance within industry funds – often the default level of cover. If you sit within this crowd, now is a perfect time to ‘compare the pair’ and seek advice on if your protection remains cost-effective – and most importantly sufficient for your needs.
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