According to modelling by big four accounting firm KPMG, the shift to make insurance in super an opt-in question for those younger than 25, those with inactive accounts and those with balances of less than $6,000 could see other savers stung with a potential premium hike of 26 per cent.

KPMG said the proposal, outlined in the 2018-19 budget, would see a 50 per cent fall in the levels of group life insurance cover and a 42 per cent fall in insurance premiums collections. The firm said this would have an “adverse impact” on premiums, with the shortfall prompting a hike in premiums.

Noting that the outcome at retirement is subject to future changes, KPMG said there were two potential outcomes. The first, in which premiums aren’t increased, would see fee-led balance erosion fall from 6.2 per cent to 5.8 per cent.

However, if premiums were to increase by the anticipated 26 per cent, the average erosion would rise to 7.3 per cent.

“The most heavily impacted categories of erosion of benefits due to default insurance cover are females and low income earners,” KPMG warned.

“For example, considering an increase in insurance premiums of 26 per cent, we estimate the average erosion of account balances for females will increase from 7.6 per cent to 9.0 per cent and low income earners (<$18,200) to increase from 15.8 per cent to 17.6 per cent.”

The firm said the changes would have both intended and unintended “material impacts”, and would leave women and low income earners “worse off”.