Insurance and superannuation executives have warned the industry to not be so quick to dismiss group insurance criticism such as that from Coalition Senator Andrew Bragg, despite the often provocative language.
Following comments from the outspoken senator referring to group insurance as “junk insurance” at the Insurance in Super Summit, Zurich chair Geoff Summerhayes said the industry should take the criticism as a valuable chance for a reality check.
“I think Andrew Bragg plays a very healthy role to a room like this [which], with due respect, can be echo chambers,” he told the attending super funds, insurers and regulators.
“Our [super] system is 30 years on. We are…the envy of many in the world, we have much to be proud of, there has been a hell of a lot of progress that has been made.
“But we won’t stay in that position by just congratulating ourselves on what a great system we are, and so I welcome Bragg’s intervention.”
Chief executive of the $175 billion Aware Super Deanne Stewart agreed with the sentiment, saying that it’s fair for “the Braggs of the world” to make their points and to “be provocative if we don’t get our own houses in order”.
“In many ways, the signature strengths of the system also in a way can hide some of the weaknesses of the system,” she said.
Group insurance’s default nature is one of these characteristics, Stewart said. While it has benefits including value for money and better access for members, the downside is that many Australians don’t know what they are opting in to, or that they even have insurance.
Aware Super is using digitisation to make members more aware of their insurance policies and the progress of claims lodged. Developed in partnership with TAL, Stewart said 85 per cent of the fund’s insurance-related transactions are now “more straight-through” and the next step is making the binding nomination and wet signature experiences better.
“Let’s not rest on the default nature of insurance inside super and think that’s game won,” she said.
Meanwhile, chief executive of REST Vicki Doyle said the $85 billion retail employees’ industry fund is working with two other large organisations – TAL and MUFG Pension and Market Services (previously Link Group) – to come up with a standardised claims lodgement process.
Doyle said it is important that different super funds work together to reduce as much of the friction in the claims process as possible.
REST paid 11,000 claims last year and approximately $500 million worth of benefits – close to 80 per cent of those claims were income protection.
“There’s no point a member or Australians having multiple different processes for multiple different providers,” she said.
“Having that broader ecosystem and working collectively again, yes, you could say it is a competitive advantage, but actually it’s in all of Australians’ best interest and our interests.
“If we all solve to it, then people will get to the conversation about the value of insurance…not ‘why am I paying the premium’, ‘when will I be able to claim on it’, ‘I didn’t know I had it’. It’d be nice to move away from all those questions.”
A story to tell
As an important product of the super system which often finds itself at the centre of political attention, group insurance has also inevitably become a contested policy area.
It was only five years ago that the legislation changed to require trustees to stop providing insurance to new members aged under 25, or where account balances were less than $6000, yet groups like Super Consumers Australia are already calling for another review into the effectiveness of group insurance arrangements.
Leaders on the panel pointed to the important role that advocacy groups play in bridging between the government, the industry and consumers. These include the Council of Australian Life Insurers (CALI), which last year broke away from the Financial Services Council (FSC) and took control of the Life Insurance Code of Conduct; and the Super Members Council, they said.
TAL chief executive of group life and retirement Jenny Oliver said insurers and super funds need to get better at telling a collective story.
“CALI is doing it really well, and all the funds are doing it,” she said.
“It’s talking about the individual stories. It’s talking about the improvements that we’ve made. It’s talking about the contribution that we make to society and the broader ecosystem.
“There is a story that we need to tell, we can’t take it for granted.”
CALI chief executive Christine Cupitt added that building trust is going to be crucial for funds and insurers to continuously meet community expectations.
“I think everybody in this room appreciates that we operate from a position of privilege and trust,” she said.
“Our research showed that only 24 per cent of people surveyed knew that a life insurer may be able to provide them with financial support, if they’re unable to work because of a mental health condition.
“So we’ve got a lot of opportunity to explain to people more the offer that’s there, and the value that that we can provide.”
