Prime Super’s move to offer trauma insurance to members as an additional product alongside the fund’s investment options was not required to meet the sole purpose test because the fund was the distributor, not the manufacturer, of the policies. An I&T News story covering Prime’s trauma insurance offering, published in late July, drew responses from industry executives questioning how the fund justified the product under the terms set by the sole purpose test, in section 62 of the Superannuation Industry (Supervision) Act,1993. Lachlan Baird, chief executive officer of Prime, said the product was not required to meet the sole purpose test because the fund distributed the product only. “It’s not out product,” Baird said.

“We have no part in it other than it is offered to members.” In what is understood to be an industry first, the $1 billion industry fund began offering trauma insurance to members as an additional product alongside default group cover in April. The product is provided by MetLife, which also manages the fund’s group risk liabilities. Baird said trauma cover was an appropriate product to be offered by superannuation funds because improved medical treatments had increased the prospects of recovery for people who have experienced severe accidents, injuries or disease. “Now, often, when we become really sick, we recover,” Baird said.

“There’s that part of recovery where trauma cover comes in.” “You often need modifications to your house to make it suitable for your condition.” The majority of Prime Super members work in the primary industries and allied trades, such as horticulture and hardware. To launch the product, the fund selected a segment of its membership that it judged would benefit from trauma cover, and contacted the members directly by mail and telephone to introduce the offering.

These members were typically higher income earners, and were within an age range in which people usually raise a family and have large financial commitments, such as mortgages and other debts. Eligible members in Victoria and Queensland were excluded due to the bushfires and floods that devastated parts of both state earlier in the year. Of the 9,000 people contacted, 612 signed up to trauma cover. Meanwhile, the fund and its asset consultant, Access Capital Advisors, have begun a review of its investment strategy to test components of its strategic asset allocation and investigate areas of its portfolio that could be improved. Prime Super last reviewed its investment strategy in mid-2007.

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