An earlier career as a personal injury lawyer showed Eva Scheerlinck how group insurance via the default superannuation sector can help ordinary people in their times of need, once they realise they have it.
“When I was working as a personal injury lawyer and speaking to people who had been significantly injured in an accident, when you said to them ‘you’ve probably got insurance via your super’, for most people that was the first they’d heard of it,” she says.
Improving the value of group insurance in super is something she has been spending a lot of time thinking about since being appointed chief executive of the Australian Institute of Superannuation Trustees (AIST) in March. Since then she has been leading the organisation’s contribution to the Insurance in Superannuation Industry Working Group. The group, formed in response to pressure from the government and regulators, is on track to release a draft code of practice for review by November, she says.
Scheerlinck is certain that retaining group insurance coverage as an automatic inclusion in the default super system is in the public’s interest.
“Group insurance in superannuation avoids a massive underinsurance problem,” she says. “I haven’t heard of any other model that could replicate appropriate cover for the majority of working Australians.”
However, she agrees many funds may need to re-think their group insurance design, particularly for younger members with low balances.
The changing nature of the workforce is another threat to the value current group insurance arrangements deliver to many workers.
“If people are not actually an employee, depending on the terms of the insurance cover they might be paying for income protection cover they would not be entitled to claim,” she says.
Scheerlinck says the working group is liaising with KPMG to examime the scale of the problem of people paying for policies that they would not be entitled to claim against.
Another issue is people with multiple accounts, when a new default fund is opened on their behalf every time they change jobs.
“Often when people have multiple accounts, there are multiple insurances being taken out and the different funds don’t know what other insurances a person has,” she says. “A lot of work is being done on account consolidation to deal with that problem.”
She would like to see an upgrade to the MyGov portal to allow people to be able to view information about all super accounts held in their name and the various insurances attached to them.
Success in improving group insurance will require a combination of better policy design and claims processes, but also improved member engagement, she says.
Scheerlinck wound up in the super industry more by accident than design. As a young Arts-Law graduate living in Brisbane in the late 1990s she wanted to be a journalist, but landed her first role as a media adviser to the Australian Plaintiff Lawyers Association. Later she moved to Melbourne to take a role as a personal injury lawyer with mid-size firm Ryan Carlisle Thomas.
Eventually, she re-joined the Plaintiff Lawyers Association moving to Sydney in 2001 as its public affairs manager before being promoted to chief executive in 2003 and leading the organisation through a merger and re-brand to become known as the Australian Lawyers Alliance.
During that period, a formative experience for the young lawyer was advocating for consumers who lost out after the collapse of HIH Insurance.
“In the end, the industry was rewarded, while every Australian lost rights,” she says. “It made me pretty angry and has kept me committed to continuing to represent the interests of ordinary Australian people.”
In December 2010, then AIST chief executive Fiona Reynolds recruited Scheerlinck to the superannuation peak body to develop its first voluntary governance code.
“Fiona asked me because they particularly wanted someone who didn’t have superannuation industry baggage, an outsider, to come in and have a look at governance arrangements,” she says.
Sharing office space with the Australian Council of Superannuation Investors led to her being mentored by industry stalwarts Michael O’Sullivan and Phil Spathis who instilled in her the ethos of the equal representation, profit-to-member model.
At the Conference of Major Superannuation Funds in 2011 she launched the first version of the governance code.
Five years later at the same conference she was named Tom Garcia’s replacement as chief executive.
So it was an important personal milestone when AIST launched its new compulsory governance code on July 1, 2017. The new code will operate on a voluntary basis this financial year and from next financial year, non-compliance will be grounds for expulsion from AIST.
The expanded governance code was produced in response to the Turnbull government’s push to force all super funds to appoint independent directors to one third of their board seats.
The new AIST governance code is modelled on the ASX Corporate Governance Principles and requires trustees to consider 22 factors. It purports to improve the quality of profit-to-member super fund boards’ nomination and selection process, professional training and development, director voting rights, risk management, board renewal, chair appointment, disclosure, transparency and remuneration.
Scheerlinck says AIST has received very little feedback from the government on its alternative governance code.
“They [the government] are intent on re-introducing their governance legislation, even though our code is obviously much broader than board composition,” she says.
She rejects the suggestion that, in the interests of transparency, AIST should disclose individual funds’ reporting against the governance code. AIST has 62 member funds including industry, government and corporate funds.
“I think funds need to be allowed a transition period,” she says.
Other policy issues that have been keeping the new chief executive busy in her first six months are formulating a response to the Productivity Commission’s review of alternative models for default fund selection and more recently the latest round of reforms to expand the power of the Australian Prudential Regulation Authority (APRA) to shut down underperforming default funds.
She is unhappy APRA’s new outcomes test will only apply to default MySuper products, arguing any extra scrutiny should also apply to Choice products. She is also worried that the broader outcomes test, which is set to supersede the regulator’s scale test, might lose sight of the most important metrics of success.
“I’m keen to see how APRA will be weighting different things in the outcomes test,” she says. “The first thing it lists is what products and features a fund offers but that’s just the bells and whistles, which in our view is not as important as net returns.”
She says AIST is looking at updating its guidance on how funds should deal with decisions about mergers.
“I think we need to have the tough conversations,” she says. “The role of the regulator is the role of the regulator, but we do need to have a look at what it is we’re doing as an industry to have the discussion on mergers and assist our members in having those discussions.
We’re looking at developing a toolkit in relation to best practice in merger discussions.”
She is also very concerned about the short timeframe the government has laid out to combine three external dispute resolution bodies for the financial services sector into a single body, to be called the Australian Financial Complaints Authority (AFCA).
“The board is yet to be appointed,” she says. “There are no terms of reference, no fee structure has been announced … We need to see all these things first and then see how much transition time is needed. There’s a big book of work the Superannuation Complaints Tribunal is still working through and it’s important to make sure they’re adequately funded to complete that.”
Editor’s note: Since the time of this interview the government has announced the appointment of an AFCA transition team reference panel. READ MORE HERE.