There are worrying indicators that the Government’s Protecting Your Super (PYS) legislation may have had the unexpected consequence of generating an uptick in claims by superannuation fund members.
Senior superannuation fund executives have confirmed that there has been a noticeable increase in claims accompanying the increased member communications around the PYS legislation, some of which appeared to be of dubious merit.
The last time superannuation funds experienced an upturn in claims activity was in the aftermath of the global financial crisis (GFC) – something which eroded life insurer profitability and resulted in increased premiums.
However, premiums have already begun to increase as a result of the low-balance and under-25 members deciding not to opt-in to insurance inside superannuation, and any uptick in claims activity is expected to exacerbate that situation.
NGS Super chief risk and governance officer, Ben Facer, was among the superannuation executives to note the uptick in claims in the aftermath of the fund having sent around 17,000 letters to members affected by the PYS legislation.
He said there had not only been an uptick in claims but also inquiries about whether members could obtain refunds of the premiums they had already paid.
The reports around member claims and inquiries have come at the same time as specialist life/risk research house, Dexx&r which has pointed to the likelihood that the major group insurers are unlikely to emerge major net winners from the PYS legislation.
“Given the increase in default cover sums insured and the current amount of total SG contributions represented by premium deductions for default cover, we see little scope for further increases in Lump Sum group premiums received by insurers derived from the provision of higher default benefit levels,” the Dexx&r analysis said.
“Our view is that the Group Super market is a mature market and future increases in group new business will be derived by both an aging member base and growth in members aged 25 or older.
“The removal of opt-out default cover for members aged under 25 and for inactive accounts is expected to result in a down turn in total group premium in 2019/2020 and over the following years.”