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Crisis Looms as Reinsurers Exit Market: The End of Industry Super Fund Group Insurance

The state of the Australian industry super group life insurance risk market has become so parlous that three major reinsurers stopped quoting on new Total and Permanent Disability (TPD) business at the end of 2014, according to analysis provided by the Australian Prudential Regulation Authority (APRA).

The analysis, provided in its latest APRA Insights publications, has served to reinforce the alarming depth of the problems which confronted the major industry super fund life insurers and which have given rise to generally higher premiums across the superannuation industry.

It said that in response to the poor claims experience of the major insurers, that by the end of 2013 "three major reinsurers had ceased quoting for new TPD business, and quotations for TPD renewal business were generally conditional on minimal changes to contract terms," it said.

"Given that group risk business is typically a ‘bundled' package of TPD and death cover, this effectively meant a significant reduction in reinsurer capacity available to group risk insurers," the APRA analysis said.

We understand that there is no interest from additional foreign reinsurers in writing business in Australia, the recent reduction in capacity has posed challenges for group risk insurers seeking competitive reinsurance quotations, resulting in significant premium increases for many group policies and reduction in terms and conditions of cover.

Sadly we have been saying for some time that the old adage that “if it is too good to be true it probably is”. Very cheap cover was never going to be sustainable and industry super funds now has a major crisis on its hands as members are going to pay significantly more for cover whilst that cover is going to be grossly inadequate in almost every instance. This is a bigger deal than any other financial disaster of Storm and all the other controversies of the past decade. Sadly, nothing is being done to resolve the situation. The good news is that there are some excellent strategies to overcome this. Talk to us about your options on 1300 861 143.


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