Aware Super head of insurance David Evans remembers being concerned when legislation changed in 2019, which meant that members under 25 or with balances of less than $6000 did not automatically have insurance cover.
But five years on, he believes that the changes around insurance in super are part of a new era of “choice” where super fund members have more options, and that funds must work harder and be more proactive in connecting with their members.
These views put Aware at odds with Super Consumers Australia, which has described some of the insurance arrangements before the changes as “junk”, being either worthless to the member or duplicating cover held elsewhere – sometimes other super funds.
Evans argues that research shows that “insurance in super is actually delivering strong outcomes for members.”
“Insurance in super is demonstrating very good value for the vast majority of consumers who hold it,” he says in an interview with Investment Magazine.
Nothing to be solved
Evans rejects calls for another inquiry into the suitability of insurance in superannuation by SCA director Xavier O’Halloran.
“What is the problem to be solved?” Evans asks.
“There has been a lot of change made by the industry in recent years which has resulted in more contemporary insurance arrangements being offered by funds which have had very good outcomes for members.”
The legislated changes to insurance in super were aimed at stopping unwanted insurance costs from eating into low-balance super funds and also stripped away insurance coverage from members whose accounts had received no contributions for 16 months.
The recent debate comes as Investment Magazine relaunches the longstanding Group Insurance Dialogue as the Insurance in Super Summit in Sydney on July 23, which brings together leaders in the superannuation and insurance industries to showcase both the consumer benefits of super insurance arrangements along with a raft of challenges.
“We had a concern at the time about the unintended consequences of those reforms,” Evans says.
“The changes were a bit of a blunt instrument.”
Evans says there was an additional challenge at the time for funds like Aware in communicating the changes to their members including emergency service workers involved in the bushfires on the east coast.
“We recognised quite early on that member engagement was going to be really important,” he says.
He says the changes have prompted his fund to be more conscious about offering improved insurance options and connecting with members about their insurance.
“The silver lining is that it did raise a level of member awareness around insurance which can only be a good thing,” he said.
Evans has been head of insurance at Aware for more than six years, having joined the fund after five years at AMP, and six years before that handling insurance for MLC and the NAB group.
He argues that super funds are moving from an era when members were automatically tied to a super fund and had little engagement with their fund, to a new era of having much more choice around their super – including their choice of fund, investments within that fund and now more options around insurance- or whether they have any at all.
“We have seen the industry shifting to an environment of choice,” he says.
“We have recognised that, moving forward, we are going to be seeing more members choosing their super fund, and more members choosing when they get insurance and more members choosing the type and level of insurance they have.”
Digitisation the key
Evans says Aware has upgraded its insurance offering to members as well as digitising the insurance process for members.
“We’ve done a lot of work to digitise all the processes and experiences that a member would have with regard to their insurance,” he says.
“One hundred per cent of the interactions a member would want to have with their fund over their insurance can now be done online, through our website or our app.”
One area of focus has been to connect with members under 25 or those with balances under $6000 to see if they do want some insurance.
Under the new rules, these members have to specifically “opt in” if they want life, total and permanent disability, and, in some cases, income protection insurance, which are automatically included for super fund members over 25 or with larger balances.
“We have introduced some very simple digital quick-cover options,” Evans says.
“We make it very easy for them to log into their account and apply for cover.
“They can get a decision on the spot, and they are not required to undertake the medicals which are often a barrier to members taking out insurance.”
Under the changes, the trustee of a super fund had the discretion to include insurance cover for members if they were working in a “dangerous occupation.”
This was the case for some Aware members.
Evans argues that the $6000 account balance threshold can also create problems for people on low incomes including those who don’t watch their super fund balances over time and can find themselves without cover.
He says the transition from no insurance to automatic insurance when the member turns 25, or their balances go up beyond $6000, is another point of contact with members.
“We put a lot of emphasis on making sure that members know when their insurance is being turned on and giving them some flexibility in terms of a cooling off period.”
But he says most members do opt to have some insurance at this transition point.
Members’ needs
These days, there are different members now coming to super funds including those who apply to become members and do not come in through their employer. In these cases, they must make a specific application to take up the insurance offered.
Today, some 550,000 of Aware’s 1.1 million members have insurance cover.
Evans believes that there is now a broader social role for super funds in looking after their members’ wellbeing.
He points out that the number of financial advisers, who have traditionally been a prime source of selling life insurance, has been declining in recent years.
The net result of that, in addition to the end of automatic insurance for the under 25s or people with super balances below $6000, he argues, has been rising levels of underinsurance in the community.
At the same time, there has been an increase in mental health claims being made through insurance in super which is creating its own challenges for funds.
“There is a huge role which super funds can play to help fill that need,” Evans says.
He says Aware has programs designed to help members with their mental wellbeing. This includes having a service called Mental Health Assist, a telehealth arrangement which allows members to speak with a mental health nurse and can lead to them speaking with a psychologist or a psychiatrist, get a review of an existing diagnosis, and other services.
He argues that at a time of rising cost of living, because the cost of insurance can be deducted from a member’s account it does not hit members’ daily budgets.
Insurance has proven to be a sore point in recent years for some super funds, with an increase in complaints about payment of claims.
For some of the bigger funds, such as Aware, it has led to a greater internalisation of administration as part of a strategy to have more direct contact with members.
“We are a self-administered super fund now, which means we have more control over the members’ experience,” Evans says.
This involves a closer relationship with insurance group TAL, which has helped Aware hold down costs by becoming involved in some of the reinsurance arrangements for its members’ insurance.
“We run a fairly unique model in that we engage with both the life insurance market and the reinsurance market as part of the renewal of our insurance arrangements to get the best outcome for our members,” Evans says.
