Leading insurers have reiterated their commitment to the Australian market despite rising claim rates, citing collaboration with super funds to attain better insurance coverage among members as key to making the industry more “sustainable”.

At the Investment Magazine Insurance in Super Summit, Jenny Oliver, TAL chief executive of group life and retirement, said she is “optimistic” about the future of life insurance even though the industry has been under pressure from waning retail insurance sales and changed rules around defaulting members into group insurance since 2019.

“We still have enormous confidence in the Australian life insurance industry, and I should say so does our parent, Daiichi Life,” she said. “Yes, we have seen increasing claim rates. There is no doubt about that. But this is still a very important part of the Australian financial services community, and a role we want to continue to play in.”

“What we are focusing on, though, is working with superannuation funds, working with the medical community, working with the government, working with the various different parts of the ecosystem to make sure that we understand how that [role] could evolve.

“We are completely committed to the industry. We are working hard to ensure that it remains sustainable. We believe that it will.”

In the five years since the introduction of legislation that dictates that young, low-balance and inactive member accounts can no longer be defaulted into group insurance coverage, there has been a 36 per cent dive in the number of members insured for death benefits, according to ASFA research in 2024.

Meanwhile, the number of group insurance claims skyrocketed with factors such as mental health becoming increasingly prominent. New Council of Australian Life Insurers (CALI) research released this week found life insurers paid out almost $6 billion in the past 12 months.

Meray El-Khoury, chief insurance officer of MetLife Australia said higher claims volumes are a sign that the industry has done a “good job” communicating the benefits of insurance, but the flip side was the “stepped change” in the number of claims, which was difficult to price actuarially.

“We couldn’t anticipate it ahead of time when we set up pricing. But we’re in this business for the long run – it’s cyclical. It’s a whole layered community. You’ve got reinsurers [and] insurers, so we’re all protecting each other along the system,” she said.

“It’s really positive when you start to talk about how we can support our members through episodic stages of ill health in their life, looking at stage-based payments, support-type payments, early intervention, embedded programs to encourage people to engage much earlier.

“And if we can do that, I think that’s where we’re really going to start to see a sustainable offer going forward, and one that we’ll be proud to continue to support.”

El-Khoury rejected the view that Australian group life insurance had become concentrated, arguing that the insurers can create competition via reinsurers even with a mandate renewable from super funds.

“I would say in this market there is hesitation… to continue to deploy capital if you don’t think you can get a sustainable return on that capital,” she said.

“In this market, we’re already seeing a pullback in firstly reinsurers – they’re usually the first players to start pulling their support when there’s too much volatility in experience, and we’re in that cycle right now.

“It is temporary and we’ll trade through, and everyone will be happy in a couple of years’ time.”

Super fund views

From the perspective of super funds, Vicky Doyle, CEO of Rest Super said group insurance was and remains an economically accessible form of insurance which is why it’s treated as the “safety net” for most members.

The most important job for super funds is engaging with members and making sure they understand insurance enough to decide on whether they need coverage. The digital experience that funds can offer also plays a huge role. From the fund’s experience of digitising annual statements, Rest Super found that it contributes to a huge uplift in member engagement.

“Pulling out insurance and having it like a separate statement of insurance puts it in comparison, like [you have] car insurance, home insurance, group insurance. Even though it’s within super, it needs to have that separate sort of piece,” she said.

“There is no better business case than people understanding they’re paying several hundreds, or maybe if they’re a bit older, a couple of thousand [dollars] for an insurance product that can help them in the most significant and devastating period of their life.

“If they understand that, anything we can invest in [uplifting the insurance side of member experience], in my view, that is a very easy business case.”

But David Woodall, CEO of MLC Super said retail funds that had a larger portion of advised members needed to offer some “configurability” around group insurance arrangements.

“We do have the advised ecosystem, where we have a lot of members who are advised and require a different proposition. We have our direct-to-consumer proposition, and then we have a medium-to-large employer book, where a lot of those arrangements are completely bespoke, plug-and-play, and benefit designs are many and varied,” he said.

“So it absolutely isn’t one size fits all. It goes beyond default and the ability to reconfigure default.”