The insurance industry needs to ensure insurance within superannuation is valued by fund members, sustainable and affordable as well as improve the member claims experience according to experts.
The role insurance plays within the superannuation system is clear said minister of financial services Stephen Jones, speaking at Investment Magazine’s Group Insurance Dialogue held in Sydney earlier this week.
“The government sees that there is an appropriate role for insurance inside superannuation as an efficient, affordable way of delivering a basic level of life insurance cover to the millions of Australians,” he said.
The challenge for the industry is to design appropriate products that are valued by members said Damien Mu, chief executive of AIA Australia. “How do we ensure that not only is group insurance fit for purpose because it meets the role of insurance inside super… but also valued by members?”
Benefit design is key to ensuring insurance is sustainable and affordable and that includes the role of default cover and how it is integrated with an effective voluntary coverage solution in or outside superannuation, according to Mu. He also pointed out the importance of member engagement and education, which will improve how it is valued as well as prevention and rehabilitation to get members back to the work force and resuming their contributions to superannuation.
“Are there things we can do collectively to prevent claims from happening by helping people live healthier, longer, better lives?” he said. “It’s really important because then people are getting back to work and getting back to getting their retirement savings back on track.”
The member claims experience is also another key aspect the industry needs to work on according to Mu. “The most important thing we’re talking about today is the claims experience, that moment in truth.”
The industry was reassured by comments from minister of financial services Stephen Jones that the industry could look forward to a period of stability after having endured significant regulatory change.
TAL chief executive Brett Clark welcomed the comments by the minister around stability and certainty. “There has been an enormous amount of change over the last three years for insurers and for superannuation funds and if we can let that settle a little, observe the outcomes and implications of that change, many of which are good but also there are some unintended consequences as well.”
Minister Jones said one of the unintended consequences of the raft of regulatory changes has been the effect of stapling on insurance, which he confirmed will be part of the Your Future Your Super review.
The industry is grappling with the rising cost of insurance premiums as a result of some of the regulation, such as removing the member cohort of young people from the insurance pool. “If a system is sustainable for insurers and superannuation funds, then it’s affordable for members and one of the unintended consequences of the changes that we’ve had is an increasing pressure on prices and premiums for insurance in super,” Clark said:
“That was known, that was well debated with the minister at the time and that has played out as we expected and there has been increasing pressure on price as a result of some of those changes”