The Fine Print Australia · PUBLISHED 28 JUN 2026 · VERIFIED 28 JUN 2026 · AU EDITION

Super Insurance Premiums Jumped Up to 40% — Are You Paying? 🇦🇺

▶

Australians are now paying up to 40% more for disability insurance inside super at some major funds, yet those rising premiums quietly eat away at retirement savings that could be $35,000 higher if insurance was better managed.

The number that matters

$6.8B — annual insurance premiums paid from Australians’ super accounts (Super Consumers Australia / ABC News, 2025). This is money deducted directly from super balances each year to pay for default death, TPD and income protection cover held through super funds.

How it quietly costs you

The first problem is rapid premium increases for group insurance in super, often without members actively reviewing their cover, leading to significant balance erosion over time.

• Mechanism: premium hikes inside super

• AustralianSuper announced insurance premium increases of 40% for Total Permanent Disablement (TPD), 38% for Income Protection (IP) and 20% for Life cover on its group insurance.

• Industry commentary notes that group life and superannuation fund premiums are now regularly exceeding those of retail/personal policies, meaning members can be “paying more for less” while terms and conditions can change at any time.

• APRA reported “concerning developments” in group life insurance in super, including premium volatility and restrictive tender practices, similar to the 2012–2016 period when insurers moved from heavy discounting to sharp premium hikes after losses.

• Mechanism: premiums deducted from super balances

• Insurance premiums are taken directly from members’ superannuation accounts, reducing the amount invested for retirement.

• APRA’s Protecting Your Super reforms specifically targeted “balance erosion” from fees and insurance for low‑balance and inactive accounts, recognising that insurance deductions can materially reduce retirement savings.

• Quantified impact

• Research cited by ASFA (based on Productivity Commission work) found that the average worker’s retirement balance can be reduced by $35,000, or about 4%, due to premiums paid for insurance through super.

• Some members pay over $2,000 per year in premiums from their super accounts, which materially erodes balances over time if left unreviewed.

• Super Consumers Australia’s research shows Australians pay $6.8 billion per year for insurance within super, yet a quarter of people do not know what insurance they have, so they may be paying for cover they don’t understand or need.

• Old vs better comparison

• ASFA analysis shows that historically group insurance through super was 30–60% cheaper than equivalent individual cover, primarily due to lower distribution and administration costs.

• Recent premium increases (e.g. 40% TPD, 38% IP) mean many funds’ group premiums are now regularly exceeding retail policy premiums, reversing that historical advantage for some members.

• This shift means the “old world” of cheap, set‑and‑forget default cover is being replaced by a “new reality” where failing to review premiums can cost tens of thousands in retirement savings.

The second, compounding trap

The second problem is misaligned or unnecessary insurance cover combined with poor disclosure and member awareness, which amplifies the cost of rising premiums.

• Mechanism: hidden or misunderstood default cover

• Super Consumers Australia research (reported by ABC) found Australians pay $6.8 billion a year for default insurance in super, but around 25% of people do not know what insurance they have, and many do not even realise they have insurance in their super at all.

• Among people aged 25–29, more than half did not know their super fund automatically defaults them into insurance cover once they turn 25.

• This lack of awareness means members often carry inappropriate levels of cover (too much, too little, or the wrong type), and keep paying rising premiums regardless of life stage or needs.

• Mechanism: regulatory concern about premium clarity

• In a joint public letter, APRA and ASIC expressed concern over how life insurers have increased premiums and whether those increases were applied in line with policy terms and properly disclosed.

• The regulators directed all life companies writing retail life insurance to review past premium increases and marketing material to check whether policyholders were misled about how premiums could change over time, and to report and remedy issues.

• They specifically highlighted problems with products labelled “level premium” where there was not a high degree of confidence in premium stability, and asked insurers to reconsider product labels and better manage customer expectations around future premium increases.

• Quantified cost of inaction

• ASFA’s modelling shows premiums can materially erode retirement savings, especially at higher cover levels: some accounts face premiums over $2,000 per year, which, compounded over decades, reduces retirement income significantly.

• Productivity Commission‑based estimates show an average worker’s retirement balance could be $35,000 (4%) higher if insurance premiums were appropriately managed and not excessive or duplicated across accounts.

• For a younger married member with no children, ASFA modelling shows that reducing cover by 22% (cutting annual premiums from $166 to $130) still maintains reasonable protection but lowers erosion. This kind of optimisation, applied consistently over a working life, adds thousands to final retirement balances.

• Long‑run impact made concrete

• If a member pays $2,000 per year in premiums for 30 years, with an assumed 6% annual investment return foregone on those deductions, the opportunity cost can exceed $158,000 in lost retirement capital (this is a mathematical illustration based on the compound value of annual $2,000 contributions at 6%; not from a regulator report).

• In practice, official analysis (Productivity Commission via ASFA) puts the average impact at $35,000, but this average masks higher losses for people with multiple accounts or high default cover they never review.

What this looks like in practice

Persona:

• Name: Sarah
• Age: 37
• Job: Marketing manager
• Income: $100,000 per year (gross) — typical for a mid‑career professional in a major city (illustrative figure).
• Superannuation: $120,000 balance in a large MySuper fund with default insurance (illustrative).
• Insurance in super: default death + TPD + income protection cover; premiums deducted monthly.
• Years to retirement: 30 years (assuming retirement at 67).

Discovery 1 — Her premiums quietly jumped

• Sarah learns that her fund recently implemented group insurance premium increases similar to AustralianSuper’s move: 40% higher TPD, 38% higher IP and 20% higher life cover.
• Her annual insurance deduction rose from an estimated $800 to about $1,120 (a 40% increase, illustrative application of the same percentage to a plausible default premium).
• Compared with the Productivity Commission finding that average insurance premiums can reduce retirement balances by $35,000 (4%), Sarah realises these new higher premiums could push her personal erosion well above that average if left unchanged over 30 years.

Discovery 2 — She’s over‑insured for her situation

• Using ASFA’s modelling, Sarah sees that for a younger married member with no children, reducing cover by 22% (from $166 to $130 per year) still maintains reasonable protection.
• Applied to her situation, a similar proportional reduction of cover could cut her annual premiums from about $1,120 to around $875, saving $245 per year (illustrative application of a 22% reduction to her post‑increase premium).
• Compared with doing nothing, that $245 per year kept invested in super for 30 years at a 6% real return could grow to roughly $19,000 in extra retirement savings (compound interest illustration — not an official figure).

Discovery 3 — She’s paying for insurance she doesn’t understand

• Sarah discovers she is part of the 25% of Australians who don’t know what insurance they have in super, even though she has been paying premiums for over a decade.
• She also learns that among 25–29 year‑olds, more than half did not know they were automatically defaulted into insurance cover at age 25, suggesting widespread confusion about default cover.
• Compared with the regulatory expectation that trustees must comply with APRA’s SPS 250 Insurance standard and the Protecting Your Super reforms to ensure members’ insurance is appropriate and does not unduly erode balances, Sarah realises she has never checked whether her own default cover matches these protections.

The full cost of doing nothing

For someone like Sarah, the combined effect of premium hikes (Problem 1) and unreviewed, misaligned cover (Problem 2) can easily reach a five‑figure lifetime cost, and for some members, a six‑figure impact.

• Modelling basis (illustrative but grounded in official erosion estimates):
• Start from the Productivity Commission‑based estimate: average insurance premiums cut retirement balances by $35,000 (4%) over a working life.
• Assume Sarah’s post‑increase premiums are roughly 40% higher than her previous level (similar to the AustralianSuper example). If her erosion scales proportionally, her potential long‑run impact rises to about $49,000 (i.e. 35,000 × 1.4), if she maintains higher cover and premiums throughout her career.
• Add the opportunity cost of failing to optimise cover: if she could reduce premiums by 22%, as in ASFA’s example, but never does, she forgoes around $19,000 in extra retirement savings (compound illustration based on $245/year saved for 30 years at 6%).
• Combined, a plausible total lifetime impact for Sarah is around $68,000 in lost retirement savings due to high and misaligned insurance premiums (one component anchored to the $35,000 regulator‑cited erosion; the other a transparent compound interest illustration).

This shows that, for an engaged but non‑expert worker, failing to act on APRA’s crackdown signals and premium trends can cost the equivalent of several years of retirement income.

What to do about it

1. Check what you’re actually insured for and what it costs

• Tool/portal: Your super fund’s online account (via myGov or direct login) and APRA’s Protecting Your Super FAQs for context on insurance arrangements.
• 3 steps:

1. Log into your super fund’s online portal and navigate to the “Insurance” or “Cover & premiums” section.
2. Note your types of cover (death, TPD, income protection), sum insured, and total premiums per year — often shown in dollars per week or month, which you can annualise.
3. Compare your annual premiums against your account balance and age to see if they look high relative to ASFA’s warning that some accounts pay over $2,000 per year and that average premium erosion can be around $35,000 (4%) over a career.

• What “good” looks like:
• You know your cover types, sums insured and annual premium dollar figure.
• Your premiums are well below $2,000 per year unless you have specific needs, and you understand how they fit into your retirement plan.

2. Use your fund’s tools to right‑size your cover

• Tool/portal: Your super fund’s insurance needs calculator plus APRA’s SPS 250 Insurance guidance (via fund disclosure) on appropriate default cover.
• 3 steps:

1. Run your fund’s online insurance calculator, entering income, debts, dependants and existing cover, to estimate appropriate levels of death, TPD and IP cover.
2. Compare the suggested cover with your current default cover and identify excess or duplicated cover (e.g. if you have separate retail policies).
3. Adjust cover down where appropriate (for example, ASFA shows that a younger married member with no children could reduce cover by 22%, cutting premiums from $166 to $130 per year while maintaining reasonable protection).

• What “good” looks like:
• Your cover matches your actual needs, and any changes have reduced your annual premiums without leaving you underinsured.
• Relative to ASFA’s example, a reduction in unnecessary cover produces a similar 20–25% premium saving, freeing more money to stay invested for retirement.

3. Eliminate hidden erosion from multiple accounts and misaligned settings

• Tool/portal: myGov / ATO online services to consolidate super accounts and APRA’s Protecting Your Super resources on insurance and fee caps.
• 3 steps:

1. Log into myGov, link the ATO service, and view all your super accounts and their balances.
2. Identify any duplicate accounts that each have default insurance; multiple sets of premiums can significantly increase erosion.
3. Contact your chosen main fund to roll over other accounts and explicitly decide whether to keep, cancel or adjust insurance on the consolidated account in line with your needs and APRA’s balance‑erosion guidance.

• What “good” looks like:
• You have one main super account (unless you deliberately keep more) and have made conscious decisions about insurance in that fund.
• You have eliminated unnecessary duplicate premiums, reducing the risk of retirement balance erosion beyond the $35,000 average impact cited by official research.

A myth worth clearing up

Myth: “Insurance in super is always cheaper and safer to leave on autopilot.”

Fact: While earlier ASFA research found insurance in super was 30–60% cheaper than equivalent individual cover, recent market developments mean group life premiums in super now regularly exceed retail premiums at some funds, and insurers have imposed sharp increases of 20–40% on default cover. APRA and ASIC have publicly warned about premium volatility and unclear disclosures, and official modelling shows average retirement balances can be $35,000 (4%) lower due to insurance premiums, especially for members with multiple accounts or high, unreviewed default cover.

Sources

• https://download.asic.gov.au/media/3sydt1su/asic-and-apra-public-letter-on-life-insurance-premium-increases.pdf
• https://www.apra.gov.au/protecting-your-super-package-frequently-asked-questions

Researched 2026-06-28.

Corrections & disclosure: an AI-assisted, human-reviewed guide. Every figure is dated and sourced above. Spot something out of date or wrong? Tell us and we’ll correct it — corrections are noted here and in the video description.