A few years ago when choice was introduced into the Australian Superannuation Market many believed this would be the beginning of the end for employer superannuation.
It was also believed that personal insurance within employer chosen super funds would decrease as a result of greater flexibility for consumers within the Australian Market place. What has transpired however is a vastly different outcome, as both have continued to grow.
The 'choice' theory suggested that as more superannuation options became available to the workforce, the amount of privately sought after superannuation plans would increase as people saw the possibility of increased performance. What was described in theory and what has occurred in practice are poles apart as employees are increasingly turning to the "default option".
Along with choosing the superannuation default option, employees are also left remaining with the default Life Insurance Policy that is included within many superannuation funds. Many Australians are unable to get Life Insurance advice, therefore the super that is chosen and contributed to by their employer is representing the vehicle through which many middle class Australians are obtaining the insurance coverage that is necessary.
The 2005 Investment and Financial Services Association underinsurance study suggests that Australians who rely on in-super life insurance had about 20 per cent of the cover they needed. As a result of this study it seems that the majority of Australians are underinsured, particularly in comparison to some of our international counterparts.
People are beginning to realise there is more of a need for life insurance and this has been driven by a number of factors. These factors include, rising levels of mortgage payments, higher mortgage repayments means that higher levels of coverage are needed to maintain the same level of protection. The cost of insurance decreasing, this is a result of Australians living longer, healthier and safer lives with high levels of employment and decreased time off work when recovering from illness or injury.
The other factor is tax. The Government has introduced a number of changes that have made employer super a more attractive means of obtaining cover. This has seen most funds being able to roll out longer-term income protection and terminal illness options within the fund.
The outlook for life insurance over the next few years is a positive one as many Australians realise the need to increase their cover. In-Superannuation cover is providing a good platform for many Australians but many will look to increase their level as more options and cheaper premiums become available.