And no, we’re not talking about shoes, phone contracts or even your boyfriend, we’re talking about the hundreds of thousands of Australians who dumped and replaced their life insurance in the last year.
According to new figures from Roy Morgan, 242,000 Australians switched life insurance providers in the 12 months to June 2018, while a further 766,000 approached other companies with a view to making the switch before eventually staying put.
Perhaps unsurprisingly, the driving motivation behind the willingness among many Australians to make the switch was cost, with 42.8% of respondents suggesting that they were looking for a better price for their premium.
“Life and risk insurance is likely to be regarded as a grudge purchase and is often included with superannuation or switched as a result of price as we have seen in this release,” said Roy Morgan’s Industry Communications Director, Norman Morris.
“In the last 12 months, one million risk and life insurance policies, or 10.8% of the market, were either switched to another company or were under consideration to do so.”
Opt-in super reform set to raise premiums
According to financial consultants Rice Warner, more than 70% of life insurance policies in Australia were held through superannuation in 2017, but rule changes put forward in the 2018/19 Federal Budget could well increase the cost of these premiums.
The changes, which are set to kick in on July 1 2019, will require Australians under the age of 25, those with low superannuation balances and inactive members to opt-in to insurance cover – a move which could impact as many as 5 million people according to Treasury data.
In a recent report Rice Warner forecasted that, as a result of the changes, premium rates for Death, TPD and Income Protection insurance which are currently provided as default under many superannuation schemes could increase by around 11.1%.
This is because, according to Rice Warner, superannuation members under the age of 25 are currently paying three times their true premium and therefore reducing the price of premiums for other members.
“After Federal Budget changes have been implemented, the option to cross subsidise will be reduced as younger members will be removed from the insured basis,” the report stated.
“Ultimately, this will increase premiums for the remaining insured members.”
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