AIA Australia has welcomed a KPMG paper on proposed opt-in arrangements for insurance in superannuation, saying the budget changes will fail to address eroding account balances.

KPMG’s report finds making insurance in superannuation an opt-in arrangement for members aged under 25 or with low-balance or inactive accounts will lead to a 26% rise in premiums for those remaining insured, eroding retirement balances by a further 1.2%.

AIA Australia CEO Damien Mu says research on the issue shows Australians will be worse off under the reforms.

An AIA-Rice Warner report, released earlier this month, shows an individual’s retirement balance would increase by $1400 over their working life if premium rates grow 15%, and by only $2600 if premiums remain unchanged.

Mr Mu says the Government should address the issue of workers holding more than one account and focus on new measures for inactive accounts, rather than removing appropriate insurance coverage.

AIA says it paid more than $75 million in claims to super fund members with active, low-balance accounts last year, and has paid $84 million on 1200 claims for members aged under 25 since 2015.