The report lauds the benefits provided by insurance in superannuation, noting that members received $7 billion in insurance benefits against $6.5 billion in premiums by the end of June last year. However, it warns that the sustainability of this system is at risk due to issues of scale and affordability.
The research attributes these challenges primarily to recent Government policy changes, specifically the Protecting Your Super (PYS) and Putting Members’ Interests First (PMIF) packages. These regulations have curtailed the scope of default insurance offerings, according to the report.
Looking forward, the report anticipates further challenges as regulatory bodies like ASIC and APRA intensify their scrutiny to enhance the insurance experience for superannuation members. Despite areas of value addition, the report asserts that insurance in super often fails to meet member expectations, marking it as a turning point for the industry.
One of the significant hurdles identified is market consolidation. Notably, only three insurers now dominate the landscape, serving 60% of funds and receiving 78% of premiums. This concentration poses a challenge for competitive dynamics within the industry.
Mercer anticipates a divergence in how superannuation funds approach insurance in the future. Some will regard insurance merely as a compliance necessity, while others may leverage it strategically as a point of differentiation.
