Product bundling in group insurance can mean super fund members pay for unnecessary cover. So, super trustees need more flexibility to design the best plan for their fund, MetLife Australia chief executive Deanne Stewart argues.
“Insurers and super fund trustees need to work together to better meet the needs of their member cohort, engage members and improve group insurance product design,” Stewart told Investment Magazine.
Members in super fund default options are automatically put into group insurance. Typically, this includes life insurance, total and permanent disability (TPD) insurance, and income protection.
However, those under 25 years old usually do not have dependants, which makes life insurance coverage less of a priority for them. Despite this, many are paying fees for the product, which puts a drag on their relatively small balances.
“MetLife has worked with clients to remove the bundling of TPD and death cover, and offer TPD as a stand-alone product to younger members,” Stewart said. “This reduces the premium rate for these members and helps address the erosion of younger members’ balances.”
She added that while young members may not have dependants, if they suffered an accident or long-term illness they would not be able to service their debts without TPD coverage.
A RateCity report found that 42 per cent of young people under the age of 24 have between $10,000 and $30,000 of personal debt, not including a mortgage.
“We have been working closely with our super fund and corporate partners, and the Insurance in Superannuation Working Group to further enhance product design, ensure balances are not unduly eroded and provide trustees with more flexibility so they can tailor support to meet members’ needs,” Stewart said.
She made the comments on Monday, May 29, 2017, as MetLife launched a marketing campaign to raise awareness among the general public of the benefits of group insurance. The push comes as the sector comes under scrutiny from the Parliamentary Joint Committee into Life Insurance and the Productivity Commission.
“One in five Australian families will be [affected] by the death of a parent, or a serious accident or illness resulting in that parent being unable to work,” Stewart said. “Without insurance inside super, the vast majority of working Australians would have little to no form of lifestyle protection.
“We have spoken with many claimants who were not aware they had insurance until either a friend, a work colleague or a financial adviser told them. We regularly hear from superannuation fund members who tell us this insurance has made a significant difference to their life.
