Due to the structure of Qantas Super’s insurance policies, this section covers the assessment of the MySuper Glidepath product and choice product. For the assessment of the default insurance we offer members as at 30 June 2022 we have:
- Considered whether the premiums paid inappropriately erode retirement benefits
- Compared the premiums payable to comparable products in the industry
- Reviewed the claims ratio, which provides an indication of whether the premiums are too high relative to the actual claims experience
The results for these objectives are mixed. The cost of Qantas Super providing insurance reflects the significant proportion of the membership that have high risk occupations. In addition, the global COVID-19 pandemic and the resulting standing down of most of our active membership, led to a significant increase in premium rates for Total and Permanent Disablement (TPD) and Income Protection (IP) cover from 1 August 2020. However, these outcomes should be balanced by the difficulty our high risk members would have in obtaining TPD and IP cover outside the Plan at reasonable rates, or at all.
In FY2021/22, the Trustee undertook an extensive review of Qantas Super’s default insurance arrangements with a focus on reducing the erosion of members’ superannuation benefits through insurance premiums. This was achieved by reducing the levels of default Death and TPD cover provided to members, which in turn reduced the average aggregate cost of default cover for Death, TPD, and IP to approximately 1.5% of salary. These changes took effect on 1 July 2022 and have shown some improvement in the insurance outcomes metrics.
In addition, Qantas Super’s insurer MetLife is proposing material reductions to the premiums for TPD and IP as the COVID-19 loadings included in the premium rates are reduced. The lower premium rates are expected to be implemented from 1 July 2023.
As at 30 June 2022, 73% of members have annual death, TPD and IP insurance premiums at or below 1.5% of their salary, which is slightly below the target we set.
Across our Plan as a whole, we observed that:
- 81% of our members have Death insurance premiums at or below the median premium payable for other funds that provide death insurance
- 13% of our members have TPD insurance premiums at or below the median premium payable for other funds that provide total and permanent disablement insurance
- 44% of our members have IP premiums at or below the median premium payable for other funds that provide income protection insurance
The claims ratio is the percentage of insurance premiums paid out in insurance claims. For example, an 80% claims ratio means that for every $1 of premium members have paid for insurance cover, the Plan has paid 80 cents back to members in claims. In relation to our MySuper Glidepath and choice members, we observed the following three year average claims ratios:
- Death cover was 105%, which is above the expected range of 75% to 90%
- TPD cover was 106%, which is above the expected range of 75% to 90%
- IP cover was 46%, which is below the expected range of 65% to 80%
The actual claims experience described above is a key input into the insurance premium changes effective 1 July 2022 and 1 July 2023.