Insurance premium rises hit superannuation funds Higher insurance costs are eating into superannuation contributions and reducing investment earnings. WORKERS and retirement savers are being hit by a surge in insurance costs through superannuation as big funds pass on unprecedented price rises to members. The increases of up to 50 per cent and are set to reduce retirement balances by tens of thousands of dollars. The higher insurance costs eat into super contributions and reduce investment earnings. According to industry experts, the life and disability insurance industry has been hit by a "massive" increase in claims that has prompted a hike in premiums. The big jump in claims has been caused by greater awareness among super fund members of their automatic life and disability insurance programs. It has also been fuelled by a trend of people seeking advice from litigation and personal injury lawyers to make backdated claims, often for incidences many years earlier. Mental illness and work-related stress is estimated to be responsible for the biggest increase in claims. According to independent research company SuperRatings, the price rises started to show up on annual superannuation statements this year, with more expected during the next two years. SuperRatings chief Nathan MacPhee said for a 30 year old, a 30 per cent increase in fees for a $250,000 insurance policy for a 30 year old could mean his retirement balance would be reduced by $21,000, today. For higher policy amounts and greater price increases the difference at retirement could soar to $100,000. According to The Risk Store, a national consultant to the life insurance industry, some insurers offered heavily discounted policies to the big super funds to lock in their business. Now, however, the increase in claims and the slim profit margins were hurting. "There has been a huge upsurge in mental illness claims, enough to make the premium structure questionable which is why they are changing the premiums," The Risk Store founder Sue Laing said. Australian Institute of Superannuation Trustees chief executive Tom Garcia said the recent insurance rises through super funds ranged from 25 to 50 per cent.