The group life insurance industry’s struggle to effectively “tell its story” and promote the sector’s consumer focus prompted controversial Federal Budget proposals that might make insurance opt-in for superannuation fund members under 25 or those with low balances.
That is the view of senior executives in the life insurance and super industry who spoke on the closing panel at the recent Investment Magazine Group Insurance Summit in Sydney.
“If there is something we should learn – we actually have all said this – it’s that we haven’t done a good enough job of promoting the value of what we do,” said Damien Mu, the chief executive of AIA Australia. “So when these issues hit, we were left flat-footed, so this trust deficit has built because this has not been a rational debate.”
Much of the industry – including AustralianSuper, consumer group Choice, AIA, TAL and others – has opposed key elements of a set of Federal Budget proposals known as the Protecting Your Superannuation Package.
Of primary concern within the industry was the July 1, 2019, start date for implementation, because of the need for funds to renegotiate contracts with insurers.
Plans to make insurance opt-in for fund members under 25 and for those whose account balances are under $6000, and to cease cover for accounts that have been inactive for 13 months, could lead to higher premiums and also might disadvantage those needing cover, industry stakeholders said.
The sixth round of Royal Commission into Banking, Superannuation and the Financial Services industry is this week focusing on life insurance, with group insurance taking up a proportion.
Matt Englund, head of workplace super at BT Financial Group, told the panel that BT Financial supported a “range of things” with regards to the proposals, and agreed with Mu that it is incumbent upon the industry to do a better job of promoting the good that it does.
“Why have those budget proposals come in the first place?” Englund asked. “[It’s] because we haven’t done a good enough job of engaging and telling our story. Insurance is story by story, member by member and claim by claim, and we haven’t done a good enough job of telling our story.”
Statistics from the Australian Prudential Regulation Authority show that the life insurance industry pays out about $8 billion in claims each year, with about $1 billion of that emanating from group insurance.
TAL chief executive Brett Clark said the budget proposals, along with the recent draft Productivity Commission report into the $2.7 trillion super sector had prompted the “biggest change that we’ve had to deal with for quite some time, at a policy level”.
“The final shape and size of that are uncertain and the final passage of that is uncertain,” Clark said. There are strong views in this room about where it needs to go and that creates some challenges in terms of setting direction for business.”
The chief executive of super fund giant Sunsuper, Scott Hartley, said group insurance was a “very good value mechanism for people to get life and TPD cover. But at the same time, be open and embrace the opportunity for change. Clearly if we don’t do that, then we’ll lose potentially the right for insurance to exist within superannuation.”