Insurance products are becoming a tool which super funds are using to differentiate themselves and increase their relevance to members, as the concept of providing averaged group insurance cover across a fund’s membership is supplanted by products tailored to the individual. However, the use of big data, or the lack of it, in the creation of the products needs to be considered.

A major sticking point in tailoring insurance products is industry funds don’t have a lot of reliable occupation data. Even if they have previously acquired the information, people change occupation without funds being aware. The only funds that have good data on this are those that are close to their employers, such as corporate plans.

Jeff Humphries, principal at cHr consulting and panel participant at the upcoming Group Insurance Summit, says this gap in data is an obstacle and that even if a person is employed by one employer they could have a range of occupations over time,

with each potentially being rated differently by insurers.

However, funds are able to begin tailoring by utilising data they have already, such as the account balance and the regular superannuation guarantee contribution, from which they can estimate salary.

Knowing a member’s salary is key because it represents the standard of living for most people which is the basis of compensating someone. Without this data it is very difficult to know at what level to tailor a product to an individual.

But he warned there were dangers in using big data to build and offer insurance products.

“About all the expenditure in my household goes through my wife’s credit card, so the banks probably think I live in poverty and my wife’s a millionaire. That sort of conclusion would be wrong,
so big data can be misleading,” he said.

He also added that employers aren’t always rigorous in where they pay contributions, which can sometimes lead to funny answers as the analysis is based on inaccurate data. For these reasons, he cautioned that big data should only be used to communicate with an individual member so that they can confirm the assumptions. This approach has the accompanying benefit of creating member buy-in.

Tailoring could also decimate the effectiveness of the collective pool. It is desirable to have a pool of lives that is fairly constant and sustains the insurance policy, because people coming in and going out destabilises the structure.

Humphries proposed strategy is to keep the collective pool going, up to a certain level, and then start tailoring insurance for the people who need more, while those that need less stay within the collective with less cover. The additional cover, for those that need it, should be rated individually because it’s the part funds can differentiate and compete on.

“You have to be a careful. When you tailor someone’s cover do you offer that in addition to the pool or if you reduce the cover are you going to reduce it within the pool design? There’s some real philosophical questions that need to be asked by trustees around how much is this collective cover, how much is individual cover and where is the cut off,” Humphries says.

Case studies

Energy Super and AV Super have tailored insurance products for their members taking into account the unique roles that large portions of their membership work and the difficulty the membership has traditionally faced in receiving adequate and affordable cover. The chairs of both funds report this has helped with member engagement and retention.

For Sunsuper, member engaged winner of Conexus Financial Superannuation Awards 2015, deeply understanding the data as well as members’ behaviour is key for development of its products and services to members.

The fund is closely monitoring insurance claims trends, customer insights and market conditions to ensure their offer to members remains relevant, adequate and sustainable. The fund is currently use a number of data sets when considering their design offering. These include claims history, member behavioural history, contributions, account balances, sums insured, age of the member, and where available salary of the member and occupations.

Wanda Britton, head of product at Sunsuper, says another key area the industry should move towards is a national claims database. This would allow the industry as a whole to better understand the claims trends and behaviours leading to better products, pricing and insurance levels.

She added the industry needs to come together to work on building a deeper level of understanding of the group insurance claims market, as they do in other insurance lines.

“As an industry it is incumbent upon us to work more cooperatively to ensure that, over the long term, we have a strong, sustainable group insurance market in Australia. There are a number of ways in which we could do this better. A couple of examples include establishing a national claims database, and building an industry-led review of early litigation within group insurance claims which examines the overall impact and cost to the industry and ultimately the members,” she says.

Jenny Oliver, general manager of group at TAL, says the potential to tap into a transactional level of data will allow the industry help design better default arrangements, as well as voluntary and advice models.

The ability to ascertain the underlying health of a member by cross referencing the content of their shopping baskets or the number of steps that they are taking a day, coupled with data such as the level of their mortgages, number of children and other income and expenses, would allow innovative and tailored products to be built on a truly representative needs analysis.

“But I suspect that this is a little way off with a few privacy and technical issues to deal with along the way,” Oliver said.


Jenny Oliver, TAL, and Wanda Britton, Sunsuper, will both be presenting at the Innovation in product design – delivering results and driving outcomes session at the 4th annual Group Insurance Summit on August 19, 2015.

To register for the conference visit

Join the discussion