From left: Darren Wickham, Meray El-Khouri, Colin Tate, Christine Cupitt, Brett Clark.

If insurance is not explicitly referenced in the government’s legislated objective of superannuation, future governments could decouple the traditional group arrangements, leading insurers have warned.

The Albanese government is currently consulting on its plan to legislate a purpose for the super system. Its proposed wording is: “The objective of superannuation is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

Zurich Financial Services Australia head of group insurance Darren Wickham told the Investment Magazine Group Insurance Dialogue earlier this month the effort to define super’s purpose was being closed watched by the insurance sector.

“The purpose of superannuation is an interesting area for all of us,” Wickham said. “I’ve always felt and I’m sure many people in this room feel that insurance is a very important part of the overall superannuation system.

“I guess there’s always a danger with defining the purpose of super not referencing insurance that a future government might come in and say that superannuation and insurance shouldn’t be together.”

Wickham said roughly 25 per cent of people retire early due to disability or to care for someone with a disability, proving the importance of insurance in super.

Coverage decline

In a subsequent session, Minister for Financial Services Stephen Jones told the Dialogue he believed group insurance was an “important” benefit provided by superannuation, but not core to its purpose.

“Clearly, super and life insurance have an important connection,” he said.

“Insurance can help members achieve a dignified retirement where they experience early retirement due to incapacity or interrupted work patterns during their working life. Around 5.5 million Australians rely on the default life insurance coverage provided by their superannuation trustee.”

Meray El-Khouri, chief insurance officer at MetLife Australia, said she had witnessed a worrying decline in group insurance coverage since the enactment of the previous government’s Protecting Your Super and Putting Members First laws.

“From a group perspective, it’s now roughly about 50 per cent of our membership who have insurance,” El Khoury said. “And that really concerns me.”

While the figure varies at different funds to which MetLife provides insurance services, she estimated the average had fallen from up to 80 per cent who were policyholders before the so-called PYS/PMF reform program, which was a response to the Productivity Commission’s finding that some balances were being unnecessarily eroded.

“What keeps me up at night is seeing things like this and thinking we’re not doing a good enough job to make sure that those people who are disengaged, don’t know what they don’t have,” El-Khoury said. “Thankfully we’re getting better at data and technology, to be able to get closer to the customer.”

Conversation hurdles

TAL CEO Brett Clark said much of the under-insurance stemmed from restrictions placed on communications with members due to strict anti-hawking and financial advice laws.

He backed the Quality of Advice Review recommendation to make it easier for trustees to give simple forms of advice or guidance to members, but expressed hope that the government might also smooth the path for insurers to give more advice (a recommendation of the QAR not yet accepted or ruled out by the government).

“We know the the life saving and life changing impact that our industry has,” Clark said. “But we’ve made it difficult for people to access life insurance in this country.”

Christine Cupitt, CEO of the newly formed Council of Australian Life Insurers, said giving super funds and insurers more “flexibility” to have better and more frequent conversations with existing and prospective customers was critical.

“We have, for many good reasons, implemented policies that have constrained our ability to talk in a way that most customers would expect us to be able to talk to them, [and] respond to basic inquiries to provide what they perceive to be a reasonable level of customer service,” Cupitt said.

“So, very responsibly and sensibly as an industry, we need to think about how we can do that better, so that we can have more genuine trusted conversations with customers and members … with the right level of guardrails and control.”

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