AIA Australia has welcomed a KPMG report showing that there will be significant financial impacts and unintended consequences from the Federal Budget’s proposed changes to insurance inside superannuation, saying young people still have insurance needs.
The report found that the adoption of the reforms could potentially halve insurance inside super held and lead to a 26 per cent raise in insurance premiums for those members retaining it. It also warned that retirement outcomes could worsen.
Furthermore, AIA said that members with active but low balance accounts or those under 25 still may need insurance. The firm paid out $75 million in claims made by low balance account holders last year and had paid $84 million on 1,200 claims for members under 25 since 2015.
“We share the Federal Government’s intention to reduce the unnecessary erosion of retirement balances, but research conducted into this issue is demonstrating that the Australian public will be financially worse off under the proposed reforms,” AIA Australia and New Zealand chief executive, Damien Mu, said.
“This is not an acceptable outcome even before we consider the serious health risks of being uninsured.
“The government should not remove appropriate levels of protection or coverage for active, working Australians, nor should they distinguish between active members due to age or account balances, as these individuals are at risk, and they do have insurance needs as with other member cohorts.
“Instead, they should be focused on new measures for inactive accounts, which would achieve two-thirds of their targeted cost savings for members, while addressing the important issue of duplicate accounts.”