He cautions that changing the line in the sand of what constitutes financial advice opens up risks to the protection of consumers. “Consumer protection should be the top concern for governments and regulators,” he says. “If a trustee of a super fund offers advice, it falls under their fiduciary responsibility to ensure that it is in the best interest of the member. The emphasis should be on removing conflicts of interest when providing advice on a member’s superannuation, including insurance.” Palmer says even if regulations were to change, AustralianSuper isn’t waiting for that day before it seeks to better inform its members. Palmer’s fund, like several others, has circumvented regulations around advice by adding an insurance calculator to its website. “Because members can play around with different variables such as age and salary themselves, it is not really financial advice,” Palmer says. “It’s more of a self-service situation.”

Calculators can help members estimate what their level of cover should be, but most of those on fund websites at the moment are basic, he says. “We are currently working with software which should improve our insurance calculator, asking questions that will better tailor the answers.” Brad Jeffrey, head of actuarial and employee benefits practice at Watson Wyatt, says if funds give their members tools such as the calculator and general insurance education, it is a call to action. “People will then be much more likely to go and get financial advice,” he says.

Despite signs interest is increasing, most funds are still resigned to the idea that the paternalistic approach is the most practical way of boosting members’ insurance levels. Some funds claim to have had a lot of success with increasing the default level of insurance, while others have decided against it because of perceived ethical problems. At AustralianSuper, Palmer says feedback on the raising of default cover from one to three units in November 2006 had been good, with less than 1 per cent of members choosing to opt out to a lower level of cover.

Of course, given the reason for raising the default cover in the first place was to address member apathy, Palmer admits it would be brash to infer that the lack of complaint meant 99 per cent of members were pleased with the new levels of default insurance.

BT Financial Group was never in danger of suffering such an illusion, after it wrote to superannuation customers in January to tell them that it would be launching an opt-out insurance product, Base Cover, in April. If members did not want their level of insurance to automatically increase, they were required to opt out of Base Cover before January 18. A BT spokesperson says around 1 per cent of superannuation customers responded to the letter with concerns about the “process” in which the new product was being offered. This prompted BT to conduct an internal review, and through phone interviews it realised that a significant number of the members were unaware that their insurance cover and premiums were about to be increased.