Page 86 - Smart Money

Chapter 4

Insurance in a superannuation policy

Most people don’t really want to give this topic serious thought because
it is too daunting. If we ask them about insurance, they answer, “My super
handles it.”

A lot of insurance policies are held within superannuation funds or within
superannuation, and there used to be a cliché in the industry that group
policies held within super were cheap and nasty. They are no longer
cheap. Now they are just nasty, because there have been a number of
claims, specifically in the last five years, and the premiums have gone up
quite considerably on these policies. So they are no longer any cheaper
than what we call retail policies or individual policies.
Most super policies are group cover, so they are negotiated between the
insurer and either the employer or the industry body. If they are looking
to reduce premium costs, they will take away benefits or dilute the
efficiency of the policy by taking away certain benefits, and that is totally
beyond the control of the individual. So the fund member, who owns the
policy, has no power. If the fund decides to take out benefits for cancer,
for example, the fund member has no power to say, “Hang on, I’ve got a
family history of cancer and I want that protected.” With retail cover, you
deal directly with the insurer; you have a full assessment and then come
to an agreement, and that policy cannot be changed unless both you and
the insurer agree on it. So you hold the power.

We have seen significant changes to group cover in the last fi ve

years. Premiums are significantly higher and benefi ts have been

reduced, and in some cases just taken away without the insured
person even being made aware of it, or having any power to
infl uence it.
We are very much advocates for having insurance cover through super,
but now you can actually negotiate retail policies, so you have an insurer
and an insured agreement, and it can still be paid by the super policy, but
it is not one of those group covers where the individual has no power.