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Funds may need to review insurance offerings
Superannuation funds may need to stop offering insurance cover over and above default levels without first gaining proof of a member's good health, according to actuarial consultancy, Rice Warner.
In an analysis published this month, Rice Warner has pointed to the increasing costs associated with superannuation funds providing insurance coverage to members over and above default levels.
It pointed to recent higher claims experiences by superannuation funds, and said this has prompted trustees to reconsider benefit designs and policy terms.
"One of the key insurance risks is the risk of anti-selection by a small number of members which results in higher premiums for all members. This commonly occurs where members are able to obtain cover without needing to provide medical evidence," the analysis said.
It said that because of this, it "may be time for funds to cease offering cover above default except where at least some evidence of good health has been provided".
Looking at the available data, the Rice Warner analysis pointed to industry funds being more exposed than retail master trusts with respect to providing additional insurance cover without underwriting.
"This can increase the exposure of industry funds to an anti-selection risk, which in turn can lead to a worsening experience for the funds," it said.
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