Funds need to engage with members and their insurance providers in order to help overcome the under insurance problem in this country. A recent roundtable held by Investment & Technology, in conjunction with MetLife Insurance, discussed the mechanisms by which funds can engage with members including better data mining and tailoring of communication to certain demographics.
Participants at the roundtable were:
• John Jones, executive manager member services, MTAA Super
• Glenn Palmer, general manager, insurance, AustralianSuper
• Mario De Bono, senior insurance consultant, IFS Insurance Broking
• Joe Farrugia, secretary, Catholic Superannuation Fund
• Frances Magill, chief executive, Statewide Superannuation
• Mark Griffiths, principal. Rice Warner Actuaries
• Geoff Brooks, manager, communications, Equipsuper
• David Atkin, chief executive, Cbus
• Rex Phillipott, chief executive, Astarra Funds Management
• Julie Lander, chief executive, Care Super
• Michael Bailey, editor, Investment & Technology
• Amanda White, journalist, Investment & Technology
• Tassin Barnard, chief executive, MetLife Insurance
• Aaron Stokeld, institutional business development manager,
MetLife Insurance Michael Bailey: We have a number of super fund CEO’s and insurance executives in the room today. What do you think are the reasons for the possible perception among people who have considered their insurance, that group insurance is adequate?
Julie Lander: We found that only about 30 per cent of our members even realise they have insurance cover, and that’s up from 20 per cent the last time we surveyed. So it’s just not an issue that is on their radar. I think people like to put it off because they don’t want to think that anything’s going to happen to them and so therefore I’ll just put that off and therefore it won’t.
Michael Bailey: In terms of a real life example of a fund currently looking at a communication campaign around insurance MTAA Super is, as we speak, preparing an upcoming campaign around the introduction of age based defaults.
John Jones: Membership of the Retail Motor Trades which is our membership is basically male and basically quite young, and has very low levels of account balance. So they’re not interested in super. They’re not interested in their super fund, and so engaging with them with communication is a constant challenge. We all know that.
We’re trying to take a holistic approach where things like improving the offer itself so that we increase the level of default cover. Introducing TPD as part of that default cover, and that’s us catching up to the rest of the industry I suspect. Making it easy for automatic acceptance limits to be available to members, up to five units within six months of them joining, without a medical statement, and a range of other things that improve the offering. But as well as that, we’re trying to make the process of applying for insurance a lot easier. We’ve put in place a dedicated insurance group within our fund team and the administration company, SuperPartners. We’re involving a medical practitioner group to assist members to arrange medicals, get their reports done, follow up for bloods and anything else that needs to be done. So making the process a lot easier. Even to the extent of…our marketing plan, trying to engage more with our younger membership by sponsorship of motor sport which again fits very neatly with the membership.
Michael Bailey: What sort of sponsorships are you undertaking?
John Jones: We’ve entered into a sponsorship arrangement with V8 Super Cars, and through two teams. The newer insurance arrangements don’t roll out until July 1, so there’ll be a fairly intense period in the lead up to that. Part of the exercise has been to develop and recognise a partnership with an insurance provider that we trusted. And that was MetLife…We were only half way through our arrangements with MetLife when we decided that we wanted to review our insurance arrangements and we had got to a point with MetLife where there was a level of understanding and trust between us. It will be multi-faceted…direct campaigns as well as some linked advertising arrangements.
Michael Bailey: How are you trying to make it real for people to look at this and maybe consider? I’m assuming the aim is that people will assess their needs and if need be top up from the default?
John Jones: I think we’ve got to engage them first to get them to even think about what their needs are, and that’s part of the challenge. And I don’t have any easy answers about that. We’ll be writing to members, trying to contact members through contact centre web site. All the usual sort of marketing and communication exercises. But in the end it’s trying to help them to make a decision. We’ve got a distribution group of business development managers and imbedded planners with IFFP, and of course a fairly extensive contact centre. And all of those sources or resources will be used in terms of promoting the insurance arrangements.
Amanda White: Obviously all the funds look at their membership demographics. Can anyone else make some comments on targeting different groups of members for those that have a wide range of members. I mean John’s quite lucky in a way that they are all of a similar demographic that you can target in that way. But perhaps Julie, your fund might be a very broad ranging group of members. Do you target them in particular ways with communication particularly?
Julie Lander: We did some broad ranging research on the fund, satisfaction of the fund and what people wanted from the fund, and what their awareness was etc. And we actually found that insurance made it on the radar for middle aged people and not younger people and not older people. Maybe the older people felt I’ve got other assets and insurance and it’s going to be too hard to get insurance or whatever. The younger people as we know are just not connected. But we have now, even just this year, segmented our membership for our midyear magazine which goes out with the midyear statement. So we’ve got four versions of that which were pretty much aged based. And so we did address insurance in different ways in each of those magazines.
We also have through our administrator, AAS, a front end system for the call centre operators, that as soon as they put in a member number it will show on the screen how many units of insurance these people have. So when that comes up the call centre operators are trained according to other criteria…you know, age and other factors about this person, to talk to them about insurance and how long has it been since they reviewed their insurance…if they’ve ever reviewed their insurance, and try to engage them that way as well.
Geoff Brooks: I think our data mining as an industry has been very poor in terms of targeting people. Some of the underlying assumptions in insurance products are out of whack with the way lifestyles have changed in the community. We offer unit based insurance in our accumulation product and you’ve got to ask whether that’s a valid thing to still offer – where it reduces after the age of 36.
The problem is for a superannuation fund, whilst aged based demographic and split might be good for understanding generally how peoples’ investment requirement will change, it does nothing to indicate how insurance requirements will change. And I think one of the challenges for administrators and people who handle all our data is to be able to send us extracts of information on triggers that may indicate changed demand for insurance like someone who updates their beneficiaries in the system. The only trigger points we have at the moment for insurance engagement are when you join the fund and when you change your job. It becomes very generic communication.
Glenn Palmer: We upped the default levels of cover and the information back from members was ‘that was great.’ But I think it also caused a bit of a problem which Tassin talked about, which was that we said to people, we’ve upped your cover. We’ve given you a lot more cover. So they think…Because they don’t know how to assess what’s the right level of cover for them, they just go, that’s great. The fund must know what’s the right level for me, so I don’t have to think about it. So I’ll just accept that’s what it is. We’ve done great things with our employers about upping the knowledge about what our insurance product is. In fact in our latest employer research it came up for the first time in our satisfaction model as being a driver of satisfaction with the fund. They said, well you’re insurance product is good, therefore this is a driver for us for satisfaction for the fund.
So that’s all great and interesting, but once you’ve got the members even thinking about insurance, that’s your first challenge. The next one is to say, well how am I going to actually have a proper dialogue with these people to actually resolve what their level of cover should be. And that’s I think where we are truly struggling – because we start falling into the personal advice we can’t give them.
We’re developing a campaign at the moment to do some outbound calling to members in a particular targeting aged group of the membership who are typically highly under insured. But we’re not going to give them personal advice over the phone because we can’t. But what we want to do is drive them to our calculator which will help them basically self-determine what the level of cover should be. But what we realised was that our calculator needs some work. It’s not sophisticated enough. It’s very basic and it doesn’t cater to peoples’ individual circumstances. So we’ve had to sideline that a little bit until we upgrade our calculator.
But we think that’s about as far as we can go. Is to get people to…give them the tools to self-determine what the right level of cover for them actually is. But I think a better solution is to actually sit down, like an adviser does, one to one and say here’s what your situation looks like, let’s develop a product for you. Let’s give the right cover for you.
Amanda White: Everyone’s been talking about the role of the adviser.
Mario de Bono: One of the main issues that comes with respect to insurance, is just that people find it too confusing. They can’t just pick up a PDS and say, oh yeah, this all makes sense. And I want a bit of this and a bit of that and a bit of that. Someone most of the time really has to sit down with them, go through it, and provide them with proper advice.
David Atkin: I think that segmentation and data mining is really very important. That we’ve got to find ways to identify the different segments and different groupings within our databases, and then provide particular responses. What Julie was saying is absolutely right, tailoring your communication. I was just remembering at STA when I was there, we did a little exercise where we did some predictive modelling around insurance.
At the time members only had one unit of insurance cover, at default. An individual had to elect at the time to increase. And so we looked at what the attributes were of members who had more than one unit and then modelled that within our database and came up with those attributes. And then we sent a targeted mail to that group, and then had a control group. And we found that we got a 9% response rate from members to that offer, compared to the control group of 3%. Actually 3% was still pretty good. But we got a 9% response rate.
Michael Bailey: What were the attributes of those who took it up?
David Atkin: It was things like, had they taken out investment choice? Have they made a roll in, in the last 12 months? Had they made an additional contribution? So signs of engagement with the fund. And an account balance above $10,000. I think they were the four key attributes. Now that was still very unsophisticated in lots of ways.
And if I just use that as an illustration to say that if funds spend some time and effort doing that data mining exercise – and I think we need to do some more experimentation – then we’ll have some success at trying to get to members at the right point in their lives, to start to think, okay I need to start to think about this. And then we need to make sure that we make it easy for them to then engage with us and then take out insurance if that’s what they want.
Geoff Brooks: I think strategically you can’t overlook the fact that insurance is one of the few things that will keep a member in a fund, that no one can offer. I mean as a retention tool it’s probably one of the most under utilised things we have. The people in Equipsuper are very interesting because they’re very mobile. Research showed that one of the primary reasons for people who’d left the fund was the fact that they hadn’t been given adequate notice of the fact that they would lose their insurance cover if they didn’t exercise their continuation option for a reasonable amount of time.
Mark Griffiths: The work we did on the under insurance problem really focused on the families with the children, so the statistics that were produced from that were related to families with children. The real gap in that study I think is with the assumption that only people with children really need cover. When I started to think about the problem, I started to think well if you were 20 and you become disabled permanently, you need to replace your income or rely on other people’s generosity or the social security system, or if you had an accident some other form of compensation.
Frances Magill: Anecdotally I’ve got one employer who has 600 employees in the social community, welfare area, who has been a CEO for 35 years and has put income protection as one of his greatest achievements, in getting all of his staff income protection because his personal assistant was struck down with MS in the last four months. And this is the only income this person will now have. I’ve got hundreds of those stories, as we all would have. So it’s the positives we need to hype up not the negatives.
John Jones: It’s not a question of whether there’s a need for insurance by young people. I agree there is. It’s a question of how they come by it. And we’ve all I suspect had the personal experience where a son or a daughter gets hounded by a bank or an insurance company over the phone at night, I’m sending you the information. Can I have your email address. And we’ve got you signed up automatically for 200 grand and it will come out of your account. We were talking about trust before. And I think that sort of activity adversely impacts on the level of trust that consumers will have about insurance issues. And I think we as a group of funds, particularly industry funds, are trying to develop a level of trust so that we can engage, so we can inform, so that they can make informed decisions to get the right amount of insurance for their needs.
Amanda White: A lot of you have mentioned the role of the employer. Obviously that’s a great stepping stone as well that you can use, rather than direct to membership. Is there a particular role that the employer plays in communication?
Geoff Brooks: I think the employer joining the fund is not a major issue. If you’re an employer fund they get the kit and they get the information directly from us. It’s again this change of employment situation where they’re leaving the employer. A lot of the action’s triggered on their account, for us, is when we get advice from the employer which might lag a month or beyond after the person’s actually left. And if they’ve got continuation options to exercise in 60 days or whatever, they’re left with two weeks to do it and run the risk of losing their insurance. So what we’ve done is we’ve created a small communication piece to actually…It’s not a very positive thing for the employer to hand out, but…you’re leaving so you’d better read this because it will impact on your super. That’s where most people are getting into strife. It’s not actually the young people when they first join their employer. It’s when they go through job changes and it impacts on their existing fund.
Frances Magill: We’ve just had experience with a large employer who’s predominantly across the primary industry area. And about 1500 members. And the employer thought they were going to do a great thing by offering in the enterprise agreement fund choice. And we were solely named and obviously the default fund, and the members themselves said no, we want Statewide. We don’t want fund choice. And the reason is the insurance. The insurance had been in those areas they couldn’t get the insurance, but they also had 20 years of experience, and they all talk to one another in all these country areas of the deaths and the total and permanent disabilities where Statewide’s paid the money, thanks to the insurer. But, you know, that we’ve actually delivered the service including the income protection. So your brand equity is important to be able to sell it but it also has to deliver to maintain your brand equity.
Geoff Brooks: I think the other element of choice though is that we found a massive shift in our fund demographic. I mean we’re basically an industry fund but the first contact, first distribution point is through the first employer that the person goes to. But once they leave they’re all in the personal division. I mean 40% of our members are now personal members. They’re disaggregated. They’re all around the place.
Michael Bailey: Is this where online calculator’s come into play? Is MetLife or the industry working on better online tools?
Tassin Barnard: There are a few things that you could be asking your insurers for – whether it’s MetLife or whoever your incumbent is. One is the provision of a calculator. I would be asking for a calculator that not only I can use but the underwriters have bought into. Number two is I believe there should be some very simple products out there, I mean easy to understand. That doesn’t mean that they can’t have extra features attached. But each feature must be designed in a very simple way. The other is getting a trust relationship between the insurer and your members because if we look at the research that has been done there’s three reasons people say they don’t buy insurance: it’s too complicated, it’s too expensive and the whole issue of trust. People say they don’t believe the insurance companies will pay. Now that’s a horrible situation to be in.
Geoff Brooks: That’s the communication problem with insurance. I mean we started PDSs and everyone loved them and then we started saying what shall we include about insurance. So we started adding pages and adding pages and adding pages. And now the insurance section is as long as the stuff about the super, you know. So a member looks at it and says, no, don’t trust it. Not that I don’t understand it, I don’t trust it.
Mark Griffiths: Calculators I think is one way of engaging with that section of the population that’s self directed. We did a study of calculators on web sites. We surveyed 100 odd plans. We talked to 79 of them about insurance calculators. Only 21 had an insurance calculator and virtually all of those were just basic, very basic calculators. So there’s really an opportunity for people who do have enough members who are interested in interacting via the web and taking control of these things to develop some good calculators. We also build calculators too.
Michael Bailey: Someone mentioned the ‘Compare the Pair’ television commercials which have been a huge success. Why isn’t there, from an industry perspective, ads about insurance generally?
John Jones: It is something that the Industry Fund Network has on its radar screen for some time in the future.
Geoff Brooks: I think one of the psychological problems to be overcome is the link between superannuation and retirement with young members. I’ve been thinking about removing the word retirement from all our communications to young members because it immediately creates a deferred benefit space of 30 to 40 years.
Frances Magill: We have a good story to tell because if somebody wants insurance, they’ve normally got to pay for it in after tax dollars, and they’ve got to find extra money. Whereas the 9%’s going in, it’s a pre tax dollar and the insurance can come out of that. You don’t have to find extra money. If you want to put the extra in, you put it into your super, then you usually get some co-contribution or some extra just to cover that. So it’s a good story to tell. I don’t know that we’re doing a good job from an industry perspective in selling it like that because we keep trying to separate it.
Michael Bailey: The Industry Super Network has some insurance related ads on the radar at least. Is it going to be possible to produce something as simple as the ‘Compare the Pair’ ads?
Joe Farrugia: The focus of course would be different wouldn’t it, because you’re not talking about competition there. We’re talking about need. You don’t want to worry about retail versus wholesale. You’re really talking about there is a need out there, you should be aware of the coverage requirements and go from there. And I think it would work.
Mario de Bono: We have a lot of enquiries potentially about people wanting to increase cover, but I think once the underwriting process starts I think you’ll find that a large percentage of those people actually drop out. Have we done any investigation as to…the people we do actually obtain information from, additional information. What percentage of those people do we actually accept, and what percentage do we actually decline? Now if we’re finding that we’re accepting most of them, perhaps some more targeted questions which will identify those people that we need to go to the next stage to, is more important, so that we don’t actually put everyone through the whole process, right. We only concentrate on that 5% that we really need to investigate further.
Geoff Brooks: You get the person to the line with good communications or whatever and then you kill them with the process.
Frances Magill: The industry do the public a disservice because we actually don’t set the right expectations when signing them up. There’s too much fine detail. It’s not understood which results in mistrust of the system.
John Jones: There’s another layer as far as we’re concerned and most other funds around the table, and that’s the administration. The administrator and the link between the administrator, the fund, and the underwriter is an important one to get right, and then where the greatest level of difference can be made. One of the successful things that we’ve done with SuperPartners is to build a dedicated team as part of our fund team that’s removed from the rest of SuperPartners insurance and claims administration. There’s a very much closer working relationship between that group and the MetLife team in Sydney. And it just works because they’re communicating with each other, and when there’s an issue people can talk about it and get it resolved, instead of the member being dislocated from the whole process.
Amanda White: Tassin just back to your wish list before and the advice you gave to funds to go to their providers. I mean is that realistic or is it just that, a wish list?
Tassin: I think it is realistic, but it depends who your provider is. Some providers will more easily be able to accommodate you and some providers won’t. It’s about negotiation. Don’t’ give me stuff that adds to the price unless it’s absolutely essential. My client is prepared to wear some risk themselves, as long as you tell them what that risk is so they know what they’re not insured for. Give me easy to understand documentation. Give me products that will suit my clients’ needs as they change over time. Don’t be paternalistic or patronising in the way you design your products. Leave some flexibility in there so that clients – in particular defined circumstances – can have auto access to certain things…We do that on the retail front, why can’t we do that on the group fronts.
Frances Magill: Government needs to give the dispensation to allow trauma insurance out of super, health insurance and those things. And for employers to be able to offer it without the fringe benefit tax necessity.