Insurance was emerging as a potential differentiator as funds and financial services providers design their MySuper products, according to speakers at the AIA-Conexus Financial Group Insurance Summit in October.
Damian Hill, chief executive officer of REST Industry Super, told the summit that his fund was “looking to take advantage” of the opportunity to include innovative insurance options in its MySuper product.
Insurance was part of the “value proposition” of MySuper, and there was some flexibility on what funds could offer.
Vanilla or chocolate chip?
As part of the government’s Stronger Super reforms, it announced that all APRA-regulated funds would be required to offer life and total permanent- disability cover, and it would be left to the trustee’s discretion whether to offer income protection.
From July 2013, MySuper products will be required to offer a standard default level of life and total permanent-disability insurance, and members will be able to increase or decrease their cover without having to leave the product.
“Differentiating on investment in MySuper is hard to do,” said Hill. “But insurance is a rich area, which will almost be open slather in terms of differentiation. Will it be vanilla or chocolate chip? There are opportunities in the market to major changes.”
Ahead of the curve
Melanie Evans, the head of superannuation and retail at BT Financial Group, told the summit that BT had changed its view of insurance in default plans and would be introducing default insurance to all members “in the next month”.
Beyond default, there was the possibility of customising insurance and designing insurance products “for people who are not the average.”
“You can put your head in the sand or you can forward,” Evans said.
“There’s a whole legislative change coming to the industry and you have to stay ahead of the curve.”
Ian Fryer, head of research at Chant West, told the summit that default income-protection cover, for example, was one way to begin engaging with fund members on the issue of insurance products.
“If people have some level of IP cover, you can at least talk about it and ask if it is enough,” said Fryer.
The Conexus Financial survey in advance of the summit asked respondents if their MySuper product would include default income protection alongside death and total permanent-disablement insurance.
The responses revealed a split, with 45 per cent registering “no” and 55 per cent “yes.” The reasons given for not providing default IP cover were mostly cost-based. Respondents saw it as a personal decision and one that could not be aligned with reasonable salary levels as a default product.