Researcher CoreData has found members with high account balances are starting to leave funds if they are not getting the level of service they expected.
CoreData global CEO Andrew Inwood told the Investment Magazine Group Insurance Dialogue last month that consumer behaviour was shifting amid a crackdown on lacklustre member experience.
The findings come amid Minister for Financial Services Stephen Jones and ASIC both telling the event that improving member experience was a top priority.
“In the past, it used to be the members with over $300,000 who were considering leaving their industry funds – that’s dropped to about $180,000,” he said, adding that the number who had called another fund had jumped from a small number to 14 per cent.
Inwood added that superannuation had moved from a product business to a service business but was still trying to solve service problems with product solutions.
Most super funds had waves of customer data which was just getting lost in the system because the process hadn’t been designed to capture it, he said.
Back to basics
Chant West general manager Ian Fryer said when looking at member services, his firm examined many factors. “But increasingly, we’re going back to the basics looking at things like how long it takes you to answer a call and at complaints,” he said.
“In some ways, all the other stuff such as using data and engaging members doesn’t matter. If you don’t get the basics right, no one is going to listen to you no matter what you say.
“The basics are about just helping members when they reach out to you. That is the time when you have to get it really right. All the other stuff you do with data or engagement is trying to get them to do that.”
Fryer said with members getting older, a lot more engagement was required but the superannuation industry hadn’t provided enough resources to get that right.
“We’ve also had lots of regulatory change, mergers and all that sort of stuff which has been taking our attention away but that’s not an excuse,” he said.
ASIC commissioner Danielle Press said service standards hadn’t improved in recent years and had even deteriorated in some cases.
“If the engagement isn’t right or strong, then people will lose confidence in the system,” Press told the Dialogue. “I think there’s a risk that people will move out of the regulated system into the self-managed space.”
She said SMSFs were now “absolutely appropriate” for a larger cohort of people.
“But if we’re thinking about people moving into SMSFs with $180,000, because they didn’t get that answer from the call desk and they have no skills, ability or time to run that SMSF, that is a risk to the public purse, not only to the individual,” Press said.
Press, who in recent weeks announced she will be stepping down as a commissioner later this year, said ASIC’s Report 760 on the life insurance claim process, released in March, showed that more work was required in this area.
“Community expectations have shifted around what is expected from super funds these days and I don’t think we’ve stepped up and met those expectations,” she said.
She noted that over the next 12 to 18 months ASIC would be testing the industry to assess where it was improving. Where it wasn’t, ASIC might look at the regulatory levers it had.
“We’ve given the industry time and we’ve tried to engage with it. I think there have been some fairly clear parameters set as to what improvements are needed. We now need to see that happen.”
Press said the key messages from Report 760 were that super funds needed to look at their data and understand their member cohorts.
“When people first go into superannuation, insurance probably isn’t the thing they’re looking at, but it’s something that they’re going to need probably 15 to 20 years after they’ve started with a fund,” she said.
“You need to be engaging along the journey of your members rather than just assuming when they need the insurance, they are going to understand it. I suspect most people won’t. Use plain English and if something is too complicated to explain, then maybe it’s too complicated to be in the product.”
The RIC review
Press was also asked about a joint review by APRA and ASIC of the Retirement Income Covenant which found that many trustees were falling short of their legal obligations to help members prepare for retirement.
“We’ve given the industry a year to get themselves in place and they are simply not there,” she said.
“We still need to see the movement into a practical outcome from a very pretty document in some cases.”
Here again, Press believed many funds still had a real lack of understanding of their members, cohorts and the data available.
“There is a very great tendency to just say, here’s the blob and it’s an amorphous blob, but we all know that that’s not right,” she said.