Cbus is set to deliver the largest rise of the three, with the fund’s death and total permanent disability premiums scheduled to jump later this week. For a 30-year-old construction worker on default cover, the annual bill rises from $590 to $857, a jump the fund links to soaring claims and higher charges from insurer TAL, even as it acknowledges the financial strain on members.
Cbus blames the premium spike on an “explosion” in claims, which has flowed through to the cost of its group insurance contract with TAL, its long-term provider. Higher claim frequency and larger payout sizes have made the current pricing unsustainable, according to fund communications, forcing a reset after several years of premium reductions.
Other large superannuation funds including AustralianSuper and CareSuper are citing the same dynamics as they wind back previously cheap cover for death and disability. Members affected are primarily default insurance holders, particularly in high-risk industries such as construction, who often rely on this cover as their main safety net.
Industry sources point to several factors driving the claims blowout, including more mental health and musculoskeletal claims in physically demanding sectors and longer rehabilitation times. Rising wages and inflation have also pushed up benefit amounts, meaning each successful claim now costs more than it did a few years ago.
Reinsurers supplying capital behind group life policies have increased their own prices in response to higher global claims, feeding through to super funds. The net result is a structural step-up in insurance costs inside superannuation, particularly for funds whose members work in dangerous jobs with higher injury risk.
Superannuation balances are closely tied to insurance trends, especially for members who rarely review or tailor their default cover. Higher premiums erode retirement savings over time, even as they provide protection for workers in risky industries like construction.
For funds such as Cbus, the challenge is balancing sustainable insurance pricing with pressure from regulators and members to preserve account balances. The recent wave of increases across Cbus, AustralianSuper and CareSuper shows an environment where low-cost default cover is harder to maintain.
