Superannuation and Insurance: Related Parties and Member Cost

Australian Prudential Regulation Authority Working Paper

26 Pages Posted: 26 Nov 2012

See all articles by Kevin Liu

Kevin Liu

School of Risk and Actuarial Studies, UNSW Business School | University of New South Wales, Australia

Bruce Robert Arnold

University of Technology Sydney (UTS) - Faculty of Business; UNSW Australia Business School, School of Banking and Finance; Australian Prudential Regulation Authority

Date Written: November 1, 2012

Abstract

Superannuation trustees nominate insurance companies to provide tax-advantaged coverage to members on an exclusive basis. We compare the premiums paid by members to the benefits received, and investigate whether the ‘relatedness’ of the trustee and insurance provider has an impact on members’ net insurance costs. Focusing on 52 retail sector funds, we find that the most relevant characteristic is whether the trust deed establishing the superannuation fund required the trustee to use a related insurance provider. We find that members of these funds purchase more insurance, and that their coverage is in the form of higher-cost products.

Keywords: Superannuation, pension fund, outsourcing, insurance, related-party service provider

JEL Classification: G23

Suggested Citation

Liu, Kevin Yi and Arnold, Bruce Robert, Superannuation and Insurance: Related Parties and Member Cost (November 1, 2012). Australian Prudential Regulation Authority Working Paper, Available at SSRN: https://ssrn.com/abstract=2180593 or http://dx.doi.org/10.2139/ssrn.2180593

Kevin Yi Liu

School of Risk and Actuarial Studies, UNSW Business School | University of New South Wales, Australia ( email )

Sydney, NSW 2052
Australia
+61 2 9385 7119 (Phone)

HOME PAGE: http://www.business.unsw.edu.au/our-people/kevinliu

Bruce Robert Arnold (Contact Author)

University of Technology Sydney (UTS) - Faculty of Business ( email )

Australia

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Australian Prudential Regulation Authority ( email )

400 George Street
Sydney, NSW 2000
Australia

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