Close to half a million superannuation fund members decided to opt-in to maintain their insurance inside superannuation.
That was the bottom line of a research paper released by the Association of Superannuation Funds of Australia (ASFA) which examined the implementation of the Government’s Protecting Your Super changes and the implications of the upcoming Putting Members’ Interests First changes.
The ASFA research revealed that around 16% of members opted to retain their insurance, which was the equivalent of about 485,000 people across the entire superannuation sector, which ASFA noted was significant.
“Given that individuals needed to engage with both insurance and superannuation in order to opt-in, this was a relatively high percentage,” the ASFA analysis said.
“Typically, opt-in rates at or below 10% could be expected in such an exercise, particularly given that funds do not always have a current address for a fund member and that members do not always open the mail from their superannuation fund. However, given the importance of insurance cover to individuals there was potential for a higher opt-in rate.”
The analysis said that opt-in rates varied across funds with the highest recorded opt-in rate being 40% and the lowest 7% with most funds recording an opt-in rate between 10% and 20%.
It said that funds with the highest opt-in rates tended to have a strong occupational affinity with their fund members through being a corporate fund or focused on a specific industry. Funds with members in occupations or industries with higher than average risks of injury or death also tended to have higher opt-in rates.
Looking at the impact of the Putting Members’ Interests First legislation, the ASFA analysis said that the measure might lead to around 1.6 million accounts potentially losing insurance cover by April, 2021, growing to about 2.3 million after eight years.
However it said that this might be mitigated by the carving out of high-risk workers aged under 25.