The provision of insurance should be included in the legislation around the purpose of superannuation, according to actuarial research house, Rice Warner.
Rice Warner, which has already pushed the issue of insurance in its submissions on the purpose of superannuation, has issued an analysis pointing out that its research highlights “the extent that superannuation funds are critical to providing life insurance cover for a high proportion of employees”.
The firm said its statistics showed that more than 70 per cent of Australian life insurance policies — more than 13.5 million separate policies — were held through superannuation funds and that, each year, there were about 17,000 disability benefits paid and about 46,000 deaths.
“Yet despite the wide member coverage provided through superannuation funds, the level of underinsurance remains high,” the analysis said.
“We estimate that the median level of life cover meets about 60 per cent of the basic needs for average households — and a much-lower proportion of needs for families with children.”
The analysis went on to say that, further, the median level of life cover would provide just 38 per cent of the amount required to ensure that family members and dependants maintained their standard of living after the death of a parent or partner.
“For total and permanent disability (TPD) and income-protection cover, the position is worse. Median cover meets only 13 per cent of TPD needs and 17 per cent of income-protection needs,” it said.
The analysis said the degree of underinsurance together with the role of superannuation funds in providing much of the coverage emphasised why the Government should include the provision of insurance in its planned legislation of the primary and subsidiary objectives of superannuation.
