Rest head of insurance Natalie Binns says the industry superannuation fund has thrown out the rule book for its first open-market tender in 14 years, focusing on the people behind the insurers not “long-winded” documents.

“We actually invited all the insurers to come in and meet, because we wanted to see who they are, what they stood for, what their views were,” Binns told Investment Magazine. “Not just on life insurance but around customer experience, how they work with their customers.

“This goes to my background, because I used to respond to tenders, so I said if I ever…got to write tenders, I would do things differently, rather than doing a whole load of documents to and from, and doing all these long-winded Excel responses in Word documents.”

AIA Australia has been Rest’s group insurance provider for 14 years, and while the fund has conducted smaller tenders, Binns says she has been “given a blank piece of paper” to imagine the future of group insurance at Rest.

Challenging times

Binns estimated that Rest’s tender was worth $750 million and was the biggest currently on the market. It comes at a challenging time for group insurance. In December, Parliament failed to pass the controversial Protecting Your Super bill, which was introduced in this year’s budget.

The industry was united in criticism of some elements of the bill, particularly the July 1, 2019, start date, which many felt would not allow time to negotiate revised insurance contracts.

“In some ways we’re blessed that we’re going through quite a big tender process, and a real evaluation of the products and what we offer,” Binns said. “I think, what the budget changes are trying to achieve, we’ll get some of that done. We’re planning some pretty wholesale changes around the default cover.”

Industry commentators say some funds may have put their tenders on ice to wait for resolution of the superannuation reforms. Tasplan was the most recent fund to tender, awarding its $20 million contract to MetLife in November, switching over from CommInsure.

Binns would not say which insurers had been involved in the tender process so far, but said most big players were participating.

Data from DEXX&R, released in May, showed that AIA was the largest player, with $1.8 billion of total in-force superannuation premiums, but its position will be strengthened when its acquisition of CommInsure – which controls $606 million worth of premiums – is complete.

TAL was the second-largest group life insurer, with a $1.7 billion share.

Binns said she wanted to see “more simplicity” around insurance, and was asking prospective partners to show how they were providing this.

“If someone reads a letter, or their annual statement, and if it says for some reason they don’t have cover, how would you put that in plain language?” Binns asked. “They [life insurers] don’t tend to cover casuals, they probably like to cover people who’ve got a permanent contract to work 15 hours a week…We always have [covered casuals]. We want to continue to do so and we want to look at how we can redefine default cover to get even closer to their individual personalised circumstances.”

A different kind of tender

Rest’s tender process began with a first-round “meet and greet” in May, where insurers selected to be part of the process sent teams of representatives – including the chief executive and members of the digital experience and claims teams – who came into the boardroom connected “in any way they wanted”, Binns said.

“They all did something a little bit different,” she said. “It really brought a flavour for who they are, where they’re at on their journey.”

This was followed by a second round in August, where those who made the cut met with Rest chief executive Vicki Doyle, who started in May. In October, Rest sent out invitations to those who were successful enough to head into the third .

“In this round, we’re actually getting them to do more of the formal, detailed, deep dive,” Binns explained. “If they’ve said that they’ve got really strong technology, well show us what your technology might be, or what you have built. Can we come in and have a look at it? Tell us more about your claims system.”

Rest’s tender team will “mull over” responses in December and do further negotiations early in the new year, with the successful insurance partner to be named early next year Binns said.

She said it was a “massive decision” to consider moving insurers.

“We want to make this a very thorough, detailed process,” she said. “There is no favouritism for the incumbent in this process…Everyone who’s been a part of the process has the same opportunity. It’s for us to find the best partner who can give the best experience for the fund.”

In October, Rest was forced to deny that deduction of insurance premiums from members who were no longer covered or had become unemployed amounted to misconduct, in a written submission to round six of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

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