Insurance within superannuation is seen as the most effective way for people to access cover.
A recent Chant West report, however, found that people might not be getting the right level of cover because insurance disclosure standards within superannuation were poor and needed to be improved.
According to the report, insurance premiums within superannuation varied widely, eating into a person's retirement savings.
"For the same member, the highest insurance premium can be 10 times the lowest premium and that difference can increase to 20 times greater at age 60," Chant West principal Warren Chant said.
Many superannuation funds have moved to weed out the cross subsidisation in their insurance policies, developing targeted policies that cover their members' individual needs.
But as Chant pointed out, most people still had no idea about their insurance cover when it came to their superannuation.
"Most members wouldn't have a clue whether the insurance premiums coming out of their account represent good value or not," he said.
And according to Chant, that was because "the level of disclosure in the whole area of insurance is so appalling".
Chant recommended a number of insurance disclosure standards in superannuation.
These recommendations include showing all premiums on the fund's website, showing premiums based on current age and showing premiums based on monthly payments.
The recommendations have been supported by the Association of Superannuation Funds of Australia (ASFA).
Responding to the Chant West report, ASFA chief Pauline Vamos said insurance disclosure within super needed to be reviewed.
"The super industry needs a universal standard on insurance disclosure. While the information about insurance currently in the marketplace complies with the law, without a standard disclosure framework it is very difficult for individuals to compare policies," Vamos said.
Insurance in superannuation is a big step toward solving Australia's underinsurance dilemma. Still, people will need the right information if they are to get the appropriate level of cover that suits them without it hitting their retirement savings.
