AustralianSuper's decision to lift insurance premiums by up to around 40% is meant to keep cover sustainable as mental health and disability claims surge, but it also means higher costs eating into the retirement savings of roughly 1.7 million members who hold insurance through the fund.
Right now, the fund holds about $410 billion in assets and has enjoyed several years of falling or stable insurance costs, which made default cover inside super feel relatively good value for many workers. That run is ending as claims data, particularly from younger people unable to return to work due to mental health conditions, has shifted sharply and pushed the cost of total and permanent disability, death cover and income protection higher across the industry.
The fund is lifting the average price of total and permanent disability cover by about 40% a year, while death cover rises by roughly 20% and two year income protection by close to 38%, depending on the member cohort. For a 45 year old in a white collar role, basic cover is set to cost around $236 a year, while someone the same age in a blue collar job will pay about $526 and only around 1.7 million of its 3.6 million members actually hold this insurance through their super. Industry bodies say mental health related total and permanent disability claims through group policies have doubled in value from about $1.2 billion in 2019 to $2.4 billion in 2024 and now make up roughly one in three such claims, which insurers say is putting clear pressure on affordability and long term viability.
Across the broader super landscape, other funds are starting to move in the same direction. CareSuper, for example, has told members its rates are rising for the first time in three years, with increases closer to 10%. Insurers working with super funds point out that group life cover is still generally cheaper than retail policies obtained through advisers and highlight that more than 12,000 members of the largest fund received over $700 million in combined benefits in a recent year, which shows how heavily Australians rely on these policies when illness, injury or death occurs.
Given the underlying claims trends, this wave of premium increases looks more like an ongoing adjustment than a one off correction in our view, and while super funds argue their rates remain competitive compared with 2022 levels after earlier cuts, the trade off between affordable premiums and comprehensive protection inside super is likely to stay in the spotlight for members, regulators and insurers over the next few years.
