Tower has signed a three-year deal with AustralianSuper to provide death and disablement cover and income protection for the fund's 1.4 million members.
The deal is the largest in Australia this year, with an annual premium of more than $200 million.
According to AustralianSuper, it would save members $48 million a year in premiums, most of which had been directed into increased levels of cover to address the issue of underinsurance.
"This is an enormous win for our members. We have been able to really harness the benefit of our size and achieve a result that will mean substantially better benefits for our members," AustralianSuper chief executive Ian Silk said.
"For some time now we have been aware of the chronic level of personal underinsurance in Australia. These new arrangements will help our members ensure they have enough insurance."
Some of the features of the new arrangement include a 31 per cent increase in death and disablement cover for the same cost, a halved waiting period for total and permanent disablement claims from six to three months and default cover that includes a two-year income protection benefit.
The tender was run over six months and resulted in a short list of three that included some of the biggest names insurance.
"We are thrilled to have been chosen by AustralianSuper as their insurance provider and are looking forward to implementing the new arrangements to achieve better outcomes for their members," Tower chief executive Jim Minto said.
AustralianSuper's previous insurer was CommInsure
The new arrangements will come into effect in early 2010.
