Insurance in superannuation is good value for members. It’s cost-effective, scalable, and unique, and there are good reasons why Australia’s first-ever Minister for Superannuation Nick Sherry helped build it that way in the first place.   

It reaches millions of Australians at scale, at low cost. That’s a genuine achievement, and we shouldn’t lose sight of it.  

But we have to be honest about the sustainability of the whole group insurance segment. And what’s specifically not sustainable right now is product definitions in the face of a continuing increase in mental health needs across society more generally.  

That’s not the only reason life insurance is under pressure, but it’s a key contributor and a real threat to the system. I think we’re headed, for the second time in recent decades, to having the regulator raise a red flag and step in.   

The funding of insurance isn’t working, and the balance sheets of some underwriters are not looking healthy. Now entirely backed by foreign capital, underwriters are, understandably, more concerned about sustainability and profitability than they are about solving Australia’s social issues.  

The alarming thing is that there are now really only four insurers actively remaining in the group insurance space: AIA, TAL, Zurich and MetLife.  

It is understood that some of those firms are losing money in Australia, or at least not making very much, which means if this doesn’t get fixed soon, that foreign capital backing could dry up.  

The Investment Magazine Insurance In Super Summit on 21 July this year will foster exactly these conversations. Not the comfortable ones, but the ones the industry has been tiptoeing around without finding a resolution.  

The four remaining underwriters are all platinum sponsors of the summit this year, with our thanks. This tells you something about how seriously they take what’s at stake.    

If you are involved in designing, administering or distributing insurance in super – or are an advocate for the system – you should be there. These issues must be resolved, one way or another, and the uncomfortable conversations are the only ones worth having right now.   

Elephant in the room  

Regulators, governments, insurers and super funds – all of them, plus arguably some NGOs – continue to struggle to fix this, even though the alarms have been going off for years. What’s making it harder than it should be is a reluctance to face into some of the things that are adding pressure to the system and inflating claims.  

One of the biggest issues is what happens when we send someone off on a TPD claim with a lump sum benefit paid out for a mental health condition. Whatever that condition may be, and this is where it gets genuinely tricky, a lot of mental health diagnoses are self-reported, which is clearly open to fraud.  

The insurance and superannuation industries are unwilling or unable to say that out loud, because there are real problems in suggesting that anyone with anxiety or depression or another mental health concern might be falsely diagnosed or be falsely making a claim.  

However, we should not resile from talking about this. It’s a real issue.  

A cancer diagnosis, or a heart disease diagnosis or the loss of a limb or other physical injury is clearly nowhere near as potentially subjective. But mental health claims, which will add up to about $4 billion from super fund members this year alone, include a lot of “invisible” stuff. 

As many of us, including myself, have experienced personally, mental health issues occur on a sliding scale. Some are completely debilitating. Some can be recovered from and are fixable or treatable. The boundaries are genuinely hard to draw.    

But the most difficult conversations are the most rewarding. And the Insurance In Super Summit will once again host them.   

Colin Tate AM is founder and managing director of Conexus Financial.

The Investment Magazine Insurance In Super Summit on 21 July this year will foster exactly these conversations. Not the comfortable ones, but the ones the industry has been tiptoeing around without finding a resolution.  

Tickets are still available for eligible Heads of Insurance and other executives and senior managers at superannuation funds.