Protecting Your Super - but what about your life?

As we all know, the financial services industry has recently been the focus of significant regulatory scrutiny – and the super and life insurance sectors haven’t escaped attention.

Helping Australians to accumulate retirement wealth through their super is a big responsibility. But no less important is ensuring that working Australians, regardless of their age, gender, salary or career-stage, enjoy a fundamental level of security: all Australians have the right to expect some protection if they should meet with sickness or injury. Insurance contained in super can provide a person with 40-50 years of protection, covering them from the point they enter the workforce right through to when they retire.

Emily Wu
Technical Partnership Manager

The legislation

The Protecting Your Super Bill was passed in February this year. Under the legislation (effective 1 July 2019), cover must cease on accounts that haven’t received contributions for 16 months. Other superannuation measures also passed included the introducing of fee caps on low balances, the banning of exit fees, and the automatic transferring of inactive, low-balance accounts to the ATO. These changes will go a long way to helping reduce the number of duplicate accounts. To address issues of account erosion, the super component of the legislation will also merge inactive accounts with active ones (or accounts with a larger balance).

Making a difference

By proposing the Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 (due to come into effect October this year), the Australian Government has reintroduced the possibility of a prohibition on providing automatic insurance cover to members under the age of 25 and those with account balances below $6,000. While the Bill is yet to be debated, it could be reintroduced swiftly after the election, as we saw with the Protecting Your Super Bill. Trustees and insurers cannot afford to be complacent.

We are proud to have supported more than 1,500 young Australians since 2015, paying out $110 million in claims to members below the age of 25. Under the proposed Bill, trustees cannot offer new members any cover until their account balance reaches $6,000. Furthermore, many workers, particularly those in casual and part-time employment may not be able to receive any insurance cover for 18-24 months as their balance builds up to $6,000. While these changes have been designed to prevent member account balances being eroded, they could affect those working in lower paid industries, meaning that vulnerable Australians with lower earning capacities (and, likely, less savings) could be those uninsured for the longest.

Our focus goes far beyond paying claims – we want to make a difference in members’ lives throughout the course of their relationship with us and we support these members to return to wellness and work as part of their claims journey.

What does the future hold?

Insuring the financial security of millions of Australians is something that should be considered a privilege, not a right. Regulatory change could come at any moment; as an industry, we need to do more now to increase member engagement, enhance education and demonstrate the shared value in group life insurance. Our industry should act now to address the following considerations:

Digital technology to raise awareness – From simple text messaging, to technology that gives a member better access to underwriting and enables them to change their cover easily. Which methods of communication would your members engage with most?
Better use of data to tailor benefit designs – Is the same benefit design for all ages still suitable? Does an age-based scale really provide enough tailoring? Is age the only proxy to determine insurance needs?
Acknowledge members who never claim – What value can you add for members who have paid premiums over a long period of time but never made a claim?
Simplify products and terms – How can we provide the right level of flexibility in the product while making products easier for members to understand? How can a member appreciate the value of a product if they can’t first understand the terms? Can the product terms even be administered?
Support a member through their life, not just their current job – In an era that promotes a fund for life (with the potential of a default fund ‘stapled’ to a member or a ‘best in show list’), how can insurance adapt to the key moments in a members’ life – mortgage, marriage, babies, work – through to retirement?

As an industry, we are still facing the prospect of a large number of members who are young, and/or still accumulating their account balance, being unable to access automatic default insurance. The proportion of members opting in for insurance cover in these circumstances is expected to be small, which means many Australians and their families could be exposed to a lack of financial security in the event that they become sick or injured. If we truly want to fill the insurance gap that might arise in the future, we must work now at highlighting to our members the value of group insurance.

For any additional information, please contact your Client Development Manager or Strategic Partnership Manager.

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Protecting Your Super - but what about your life?

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Making a difference

What does the future hold?

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Protecting Your Super - but what about your life?

The legislation

Making a difference

What does the future hold?