AustralianSuper will introduce online underwriting and claims assessment as part of a $600 million group insurance deal which has put an end to the fund’s long-standing relationship with Comminsure, with Tower Australia pipping the incumbent and Metlife for the contract to provide death, disablement and income protection insurance for 1.4 million members.
Tower Australia beat 12 other insurers, including the shortlisted Metlife and Comminsure, to secure the three year deal, the largest in Australia this year with an annual premium of more than $200 million.
The new arrangements, which are expected to take effect in early 2010, have resulted in an increase in death and disablement cover from 8 per cent to 31 per cent for the same cost, and the inclusion of income protection as part of the default arrangement for the first time.
Ian Silk, chief executive of AustralianSuper, said the deal had reduced premiums for members, with expected savings of over $48 million a year in premiums.
He said the ability to take the fund’s group insurance service online was a key factor in the selection process.
“We had four key criteria: price, service and technology, design and risk,” he said.
“The service and technology was a really important element of the whole decision-making process. There’ll be a substantial online presence in underwriting and in claims assessment.”
Under the new terms, members will have up to 10 times more death and disablement cover under the Automatic Acceptance Levels up to $1.5 million.
Default cover now includes a two year income protection benefit, and the maximum automatic entitlement for the standard default death and TPD cover has increased from $130,000 to $170,000.
Silk said he believed scale played a major part in achieving the terms agreed with Tower, and this was also emphasised by the insurers in their proposals.
“The fact that we have a number of members that will be covered by this insurance contract is something that each of the shortlisted insurers said was a material issue for them in pricing and agreeing to a number of the design changes that we sought,” he said.
Comminsure has been providing group insurance for AustralianSuper, including ARF and STA pre-merger, for 11 years.
Silk said all three shortlisted insurers put up compelling tenders, which “says something for the depth of the Australian insurance market”
“We have had a relationship [with Comminsure] for a considerable period of time, and when we went to the market they still proved themselves to be a very competitive force but the totality of the issues that we considered in the tender, we just marked Tower slightly ahead of the other two, including Comminsure,” he said.