Huge gap between high-end and low-end insurance

There is a huge disparity between the cheapest insurance and the most expensive, with some superannuation funds having upped their premiums by 150 per cent over the past two years.

This is the finding of Chant West's 2014 super fund insurance survey, which found a 40-year-old female worker in a white collar job would have to pay $120 a year for $300,000 of death and disability cover in the cheapest fund. This could rise to $767 in the most expensive fund.

This disparity is wider for white-collar males, who pay only $76 for the cheapest, and $767 for the most expensive.

Chant West's head of research and the survey's author Ian Fryer said this could have huge consequences on retirement incomes.

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"A lot of super fund members get automatic insurance cover when they join, but that cover comes at a cost because every dollar of premium is a dollar that's not being invested for their long-term benefit," he said.

He said premiums have been increasing over the last couple of years due to more disability claims, mainly due to the rising influence of compensation lawyers.

The survey also showed the closing gap in premium differences between industry funds and corporate master trusts.

Industry fund premiums have been going up due to the rise in disability claims, not just from people becoming disabled, but more people realising they can claim even if their disabilities occurred years ago.

Master trusts' premiums have come down by about 20 per cent on average due to the abolition of the commission element from premiums.

Master trusts are not allowed to pay commissions to advisers under the new MySuper regime.

The premium index for industry funds in death and total and permanent disability was 0.95, while master trusts had an index of 0.97. The public sector remains the lowest at 0.81.