The Insurance Administration Expenses report, prepared by Rice Warner and commissioned by the Association of Superannuation Funds of Australia (ASFA), found group insurance within super accounted for 71 per cent of the total death benefit sums insured, 88 per cent of the overall total and permanent disablement (TPD) sums insured and 59 per cent of income protection monthly benefits.
ASFA chief executive Pauline Vamos said the Australian superannuation system is unique in that it provides “additional benefits such as insurance and access to limited advice”.
“This is often not taken into account when it comes to making comparisons of pension and superannuation systems in other countries,” she said.
Ms Vamos said underinsurance is a real problem for individuals and for governments, which “absorb the cost of underinsurance through the provision of social security services”.
“What this report shows is that these costs would be substantially higher if millions of people were not covered by insurance through their superannuation fund,” she said.
The report estimated that insurance reduces the annual cost to government of social security by about $403 million.
Ms Vamos said default insurance has assisted thousands of people deal with financial hardship after an unexpected tragedy.
“Without it, it’s likely many people would not even have a basic cover of life, TPD or income protection insurance cover,” she said.
“While there has been a lot of commentary regarding superannuation fees, the same focus should be placed on the benefits that superannuation delivers,” argued Ms Vamos.
