Depending on the profile of the superannuation fund membership and the deal negotiated by each fund with its insurer, fund members could be paying very different insurance premiums for the same level of cover.
Mr Stephen Fay, Rainmaker Information's head of superannuation research, said, "There is significant variation in the price of insurance super fund members pay. While the median premium amount for standard insurance cover paid by a 45 year old fund member working in a low risk occupation is A$3.76 ($2.81) per week, the most expensive super fund charges A$11.78. The cheapest funds charge as little as A$0.48 per week which is a staggering 25 times less."
These findings are based on a study of 15,000 insurance deals on offer through 220 superannuation products conducted by Rainmaker Information, a financial services information company in Australia providing market intelligence, industry research and consulting services.
Mr Fay explained that the premium prices super fund members pay for their insurance is driven by their level of risk. For example, around 50% of super funds vary their insurance cover and premium prices according to the type of job or occupation in which the member is employed. Around 30% of funds vary their insurance cover based on the gender of each fund member.
"Super fund members in higher risk jobs will on average pay twice as much for their insurance cover as members in lower risk jobs," he said.
But even within these risk groupings there can be large price variations: "For a 25 year old super fund member with standard life insurance their cover could range from A$50,000 to over A$600,000 and their weekly premium costs could range from A$0.45 to A$7.80.
"However super funds providing the most insurance cover aren't always the most expensive." he said.
While not for profit (NFP) funds, i.e., corporate, public sector or industry funds, generally offer higher levels of standard cover default insurance than retail funds, they normally provide this insurance cover at a cheaper rate. Consequently the average weekly cost of default cover is lower for NFP funds than retail funds.
Insurer market share
The insurance companies partnering with super funds to provide insurance cover to the most fund members are AIA with a 28% market share followed by TAL with 26%, and AMP, CommInsure and MetLife each with 10%. These five insurers control 84% of the market.
TAL has the largest market share for NFP fund members and AMP has the largest market share for retail fund members.
Only one third of super fund members are covered by Australian owned insurers.
Superannuation funds are the biggest supplier of life insurance in Australia, providing insurance to 11 million account holders.