The Insurance Administration Expenses report commissioned by the Association of Superannuation Funds of Australia said plaintiff lawyers are seeking resolutions before it is possible for internal reviews or reviews by the Superannuation Complaints Tribunal to be conducted.
Rice Warner said in the report that a vast majority of these claims would be paid “regardless of the involvement of plaintiff lawyers”.
“The inclusion of lawyers in the process increases costs for the trustee and also reduces the benefits paid to members due to the legal fees being deducted,” said the report.
“Anecdotal evidence suggests these fees can be as high as 40 per cent of the insured benefit.”
The report, which aimed to examine the administration costs of providing insurance for super funds, showed insurance accounted for 19 per cent of total fund base administration expenses in 2013 or a median expense of $6.36 per account.
“This is equivalent to about $204 million a year,” said the report.
Rice Warner noted this figure only includes quantifiable costs, however, with some of the other unquantifiable costs such as consulting and advice services, record establishment, record updating, client communication and compliance not accounted for since they are bundled into the overall administration fee.
