The insurance disclosure standards of superannuation funds are poor and need to be lifted, the latest research by Chant West has found.
While administration and investment fees usually get all the attention, the report’s key findings indicated that insurance premiums in superannuation vary widely and could stealthily eat away at a member’s retirement savings.
The research found the differences in premiums between the cheapest and dearest funds can easily run into thousands of dollars a year.
“For the same member, the highest insurance premium can be 10 times the lowest premium and that difference can increase to 20 times greater at age 60,” Chant West principal Warren Chant said.
“Such differences in premiums can have a major impact on a member’s final benefit, for example $37,000 over a 20-year period for a 40-year-old white-collar male.
“Most members wouldn’t have a clue whether the insurance premiums coming out of their account represent good value or not. And nor could they, because the level of disclosure in the whole area of insurance is so appalling.”
To address this problem, the Chant West report recommended nine insurance disclosure standards that should apply to all superannuation funds.
Some of these disclosure rules included showing all premiums on the fund’s public website, showing all premiums gross of tax, showing premiums based on current age, showing premiums per $1000 of cover, and showing premiums based on monthly payments.
Chant said improved insurance disclosure is another step towards informed decision-making.
“Insurance offerings are improving all the time, so it’s time to shed more light on both the costs and benefits of insurance,” he said.
