AustraliaSuper fund members unhappy about insurance price hikes
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Wayne Andrys was so happy with his super fund LUCRF that a decade ago, he convinced his wife to move her savings across to it.
"I said to my wife, 'Come over to LUCRF, it's a really good superannuation fund,'" he said.
"I thought it was the superannuation for us into the future."
For the entire time they have been with LUCRF, Mr Andrys and his wife Elizabeth have been paying for life insurance. For Mr Andrys, who is 63 and works as a storeman, his $162,000 life insurance coverage costs him $7.68 a week.
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Ms Andrys, who is 61, has $264,000 cover because her white-collar job is seen as less risky.
Mr Andrys said he wanted to make sure his wife and family were looked after if anything happened to him.
"The reason for the death cover was to cover any outstanding bills and debts that are there. And there's a few there, and I'm sure most of the members are in the same boat," he said.
But in April, the Adelaide couple received unwelcome news.
LUCRF said it was repricing its insurance and members aged over 55 would now be paying more and getting less.
Mr Andrys' premiums were to jump from less than $8 per week to more than $11 per week.
Meanwhile, their coverage was being slashed. Mr Andrys' cover would drop from $162,000 to just $54,000, while Ms Andrys' cover would drop from $264,000 to $96,000.
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"It really is a joke and a slap in the face to all those people that have worked hard all their lives knowing they had that security blanket sitting there for them," Mr Andrys said.
"It's been taken from underneath them."
After contacting LUCRF to register their anger, they received a second letter from the fund.
It said they could keep their level of cover but at a cost.
Instead of paying $7.68 a week, Mr Andrys would need to pay $34.27 a week — a nearly 450 per cent increase.
His premiums would cost nearly $1,800 a year.
"Our coverage is going to drop dramatically, our payout figures are going to drop dramatically," he said.
LUCRF was unavailable for an interview, but in a statement to 7.30 said "recalibrations undertaken by LUCRF Super aim to evenly and fairly reflect the true cost of insurance cover as the membership's profile evolves over time".
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"The changes introduced will make insurance fairer by ensuring young members do not unfairly pay more in order to subsidise claims made by older members."
But Mr Andrys was not satisfied with the company's response.
"My argument is you didn't show due diligence to your members 10 years ago, when you should have been making adjustments then. And that's just purely bad management," he said.
'I was gutted'
LUCRF has around 160,000 members and said 80 per cent of its members would be positively affected by the change.
But that meant roughly 32,000 members would be worse off than they were previously.
In Melbourne, Pamela Oldfield and her husband Bernard are both 63 years old and are being hit by the changes.
They have their superannuation with LUCRF and said their life insurance provided peace of mind.
"Because it's still a safeguard for if one of us passed, and they are covered, and they've still got this other bit of income coming in as well as covering funeral costs and stuff like that," Ms Oldfield said.
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Their insurance premiums were due to drastically hike on July 1.
Ms Oldfield's $53,1400 coverage would go from costing $2.56 a week to $11.42 a week, while Mr Oldfield's $26,570 coverage would go from costing $1.28 a week to $6.40 a week.
"I was gutted more than shocked," Ms Oldfield said.
"I thought, how can these people do this? We've been paying it all our lives.
"Here we are now coming near retirement, and maybe we'll never use it, but you don't know.
"You can't see into the future."
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Xavier O'Halloran is an expert on superannuation with consumer advocates Choice.
"I've got a lot of sympathy for the people that are getting shocked with huge premium increases," he said.
"It comes across as really unfair. And I think a lot of the communication from the superannuation funds could have been better to explain why these prices were necessary."
He said LUCRF's previous insurance model was unusual and unfair.
"The way the insurance product is structured across this fund is quite unique," he said.
"A lot of funds will price in terms of risk, whereas this fund has pretty much had a flat rate across their entire membership."
But LUCRF was not the only superannuation fund rejigging its insurance offering.
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There will be major changes to all superannuation accounts from July 1, with a suite of reforms called "Protecting Your Super" due to begin.
People who have multiple superannuation accounts will no longer automatically take out insurance on all those funds.
One reform will make insurance opt-in for consumers whose accounts have been inactive for 16 months. This means less accounts paying insurance premiums — which means insurance costs will go up for some people.
"Some of the changes related to protecting your super are seeing premium rises across the board. And that was expected," Mr O'Halloran said.
"Because a lot of the duplicate funds are getting taken out of the system, it means that there are less funds and less premiums going into the hands of insurance
LUCRF said its changes to prices have nothing to do with these reforms, and that they came about because of an independent review of their insurance offering.
'No single rule applies to all super funds'
Bernie Dean is chief executive of Industry Super Australia boss, which represents superannuation funds like LUCRF. He said each fund must individually decide on the best pricing structure for their insurance offering.
"There's no single rule that applies to all super funds," he said.
"Super funds can have very different memberships. We have some super funds that have aging memberships and others that have very young demographic.
"The Government's changes recognise that these decisions are best left for the trustees of funds. And when it comes to not-for-profit and industry super funds, specifically, it's the members' interests that really drive that decision-making."
He said now is a good time for members to contact their funds to make sure they have got the right product.
"What we're finding is that many people are realising for the first time that they've had insurance within superannuation and that insurance might not have been appropriate for them. So by turning off that insurance, or modifying it, they're actually getting a boost to their super account," he said.
Pamela Oldfield said LUCRF's hikes are too big and unfair, so she will be dropping the insurance.
"We are going to fill out the form and say cancel it," she said.
"And we're also looking into our superannuation, looking at other options to move that on too."
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