NGS Super has delivered a tailored insurance offer to its members that keeps premium rises under control and offers a sustainable three year deal for members and the insurer.

Cheaper more APRA compliant, more tailored for members, a three year agreement with the insurer and a better financial settlement for those who make a claim. The new insurance deal that comes into force for NGS Super members in a months’ time appears to solve many of the concerns of super funds.

The basis of the change is the ending of cross-subsidisation of premiums amongst members and a greater focus on income protection instead of TPD.

Premiums are now aged based, with a different configuration of cover for income protection, TPD and death at each age according to need. So the youngest in the plan will have lower death cover, but better income protection.

Laura Wright, general manager at the fund, says: “Our current product has large amounts of death cover for young people, but the majority do not have dependents.” So, it was decided this generosity of cover at a young age was not meeting any particular need.

However, at the ages when most members get married, buy a home and have children the amount of cover for death, TPD and disability rises in line with their needs.

For older members premiums will rise due to the removal of cross-subsidisation, but the changes were accepted by members after consultation, not least as they responded well to extending
the maximum period of income protection to five years.

Wright says: “The premium has been tested for a number of different member profiles, to ensure it is reasonable and affordable, with members having the ability to further dial up or dial down their cover.”

The new design was worked out in a partnership between actuary Jeff Humphreys, NGS product manager John Pederson and the fund’s insurer Comminsure.

While one of the drivers of change was affordability, Wright admits that the new MySuper regulation requiring products to be appropriate to member needs and to what they pay for helped “focus the mind” when designing the new plan.

Part of the driver of the new design was meeting the needs of NGS Super’s demographic, which is 70 per cent female and fairly mature.

TPD cutback

The second biggest factor in the change is a design that makes members less likely to claim for TPD. Firstly, the TPD payouts were reduced for some age groups, while it was made easier to claim income protection. In future, there will be a greater emphasis on rehabilitation and retraining under income protection before TPD is offered.

The change was partly driven by the belief that people better manage an income stream than a lump sum.

“The lump sum that is given to people does not last that long, people are not good at managing it,” says Wright.

The new design is seen as likely to reduce the cost of claims, which has encouraged Comminsure to agree to a three year deal. This length of deal is becoming increasingly rare as most funds see soaring claims. Wright admits that without the changes members would have been looking at rises in premiums of at least 30 per cent.

Wright sees change as overdue. “For many years insurance design has been fairly similar. We have probably been involving slower in insurance than in investment choice,” she says.

The new offer launches on July 1, when NGS will also be launching an online insurance ‘needs calculator’ which can quote prices for different levels of cover.

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