The underinsurance gap for life insurance continues to grow as more people move to self-managed superannuation funds (SMSF), Rice Warner Actuaries says in a new report on life insurance.

The actuaries estimate there are about 300,000 SMSF members who should have life insurance but don’t.

“Only 13% of SMSFs provide insurance cover, so this sector could be described as the ‘forgotten’ sector of life insurance,” it says in the report.

“Some insurers have identified this as a growth opportunity, but we have yet to see any significant inroads being made into the SMSF life insurance market.”

When people leave a superannuation fund provided by their employer or union, life insurance cover ceases. Rice Warner says a variety of reasons stop members seeking new cover.

For example, establishing new cover can be complex and time-consuming.

“The levels of default cover without evidence of health that large superannuation funds can obtain are often forgotten when individuals establish SMSFs,” the report said.

“They are a particular issue for those in less than good health, as they may face the prospect of significant premium loading or being declined if they apply for individual cover subsequently.”