Shane Fielding

SuperFriend – a not for profit mental health foundation formed by Industry Super Funds and their insurers – today released a ground breaking study into the real cost and level of insurance claims relating to mental illness and suicide.

In association with IFS Insurance Solutions, SuperFriend collected data from 13 ‘all profit to member’ super funds and six major group insurers over a five year period from 2007 to 2011, covering 4.1 million members.

The Super Mental Illness National Data (SuperMIND) Project showed that over a five year period claims related to suicide collectively cost the super funds’ insurers over $200 million with an average cost per claim of $120,410. Mental illness-related Total and Permanent Disablement (TPD) claims cost $147.9 million, at an average cost per claim of $82,960.

SuperMIND analyses claims related to mental illness, both TPD and Income Protection (IP), and suicide by gender, age and location, with the aim to help ‘all profit to member’ superannuation funds – and their insurers – better understand claim trends related to mental illness and suicide, and to target support for members.

The research found claims attributed to mental illness and suicide represent approximately 10% of all insurance claims within super. In some age groups this rises even higher, with suicide accounting for nearly 26% of all male death claims in the 25-34 age group and mental illness accounting for 25% of all female TPD claims in the same age group.

“The SuperMIND research reinforces the reality that mental health and wellbeing is a risk management issue not just for super funds and their insurers but for government, employers and the broader community,” SuperFriend CEO Margo Lydon said.

“Mental illness-related claims are one of the few insurance claim types that a fund and their insurer can influence, lessen and ideally prevent if detected early. By providing participating funds tailored SuperMIND reports that track their results against the benchmark, this research aims to help funds better understand and identify where issues are happening – by age, gender or location. Funds and their insurers can then actively develop early intervention strategies to help reduce the financial and social impact of mental illness and ultimately better support their members’ wellbeing.”

Other key findings from the research, included:

• Mental Illness-related Total and Permanent Disablement (TPD) claim rates peaked for males aged 50-54 and females aged 55-59
• Mental Illness-related TPD Claim rates were higher for men than women at all age groups between 15 and 64 and in most locations.
• Mental Illness-related IP Claim rates were higher for men than women at all age groups between 15 and 64, except in the 55-59 age group.
• Claim rates for suicide were around five times higher for men than women – a trend that reflects the higher suicide rate of males in the broader community.
• Victoria and Queensland had claim rates for suicide that were almost double the claim rates of other locations.
• Victoria and Queensland had claim rates for both mental illness-related TPD and IP that were higher than the claim rates of most other locations.

Big data helps super funds drive solutions

Shane Fielding, Principal of Group Risk at IFS Insurance Solutions, who analysed the data, said while there has been significant focus on the impact of increased claims on the cost of insurance within superannuation – with premiums rising anywhere from 30% to 150% over the past 18 months – this is the first time data had been collected and benchmarked to identify trends and help drive solutions beyond price increases to manage the increasing rate of claims.

“While insurers do need to think about how they price their offer, product design and the claim process is equally as important when it comes to claims related to mental illness,” Mr Fielding said.

The project does not aim to answer why certain trends have occurred but rather provides the most detailed analysis yet of what is happening and where it is happening in terms of mental illness and suicide claims for Australia’s ‘all profit to member’ superannuation sector.

“The financial and social impact of mental illness and suicide is significant and reinforces the need for preventative measures through greater member and employer engagement and education as well as early intervention, rehabilitation programs and wellness initiatives to help members stay in work or return to work sooner,” Ms Lydon concluded.

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The average age a person discontinues one or more of three types of living insurance policies – cover for disability, critical illness/trauma and income protection – is 45 years yet the average age for a claim is 46.5 years.

This analysis for the 12 months to September 2013 for advised policies of living insurance* does not include traditional life insurance where a lump sum is paid upon death.

TAL Group CEO Jim Minto said the figures were disturbing because they demonstrated how these customers who stopped their policies were statistically doing so at the time when they were most likely to need financial protection.

“We know that cost of living pressures are continuing to force people to rethink their domestic budgets but it is very unfortunate that those people who stop their policies for this reason do not see financial protection as essential for themselves and their families,” Mr Minto said.

“Basically, those people are betting that statistical averages will not apply to them so they can use the saved money for some other part of the household budget.

“A family’s future income is their most important asset. If that income stops due to accident or ill-health it can be devastating for a family both financially and emotionally in terms of lifestyle changes that may have to be made.”

The average age a person takes up living insurance is 37.5 years, which means that the average lapse or discontinuance is 7.5 years later at 45 years of age and the average claim is made nine years later at 46.5 years of age.

Additional analysis of income protection only shows that half of all current claims for that category are made within 24 months of the policy being taken out (1 in 2), compared to a claim rate of 40% two years ago (2 in 5).

And, incredibly, the time between taking out income protection and making a claim is now 1.25 years shorter than it was just two years ago, reducing from almost 6 years to 4.7 years.

Mr Minto said this new analysis underlines the industry trend for people to increasingly claim on their life insurance products, with TAL’s own total claim payout figure rising 45% last year to $843 million.

“The increasing rate of life insurance payouts being made is really good news because it demonstrates the value and need of life insurance in protecting customers and their families when they most need it but I do worry about those who stop their policies when they are most likely to need it,” Mr Minto said.

“Life insurance provides peace of mind, helping people sleep better at night, but there is a tangible benefit with claim payments helping people not only protect the life they have created but the one they have dreamed of for the future.”

* Advised policies of living insurance make up the following types of insurance sold through the financial adviser channel: disability – lump sum upon permanent and total disability; critical illness/trauma – lump sum upon medical event such as heart attack; and income protection – regular income payment upon defined illness/disability.

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Patricia Montague

AMP has made a number of enhancements to AMP Flexible Super, its leading superannuation and retirement product, making it a more competitive and attractive product for customers saving for their retirement.

A new retail insurance offer within AMP Flexible Super, Super Protection, will offer customers more competitive insurance premiums. Super Protection includes cover for Death, Total and Permanent Disability (TPD) and income protection.

AMP Director of Superannuation Patricia Montague said it was important to make insurance accessible for as many people as possible.

“Helping more Australians secure their financial future is at the heart of AMP’s values.  The launch of Super Protection means customers can access insurance at a lower cost.

“We know that for most Australians, their families are their most important asset. It is important for AMP to provide customers with a competitive way to access insurance to provide them with the protection they need,” Ms Montague said.

Super Protection replaces Flexible Protection, AMP Flexible Super’s existing insurance offer.  Flexible Protection will remain open to existing customers.

In addition to the insurance changes, AMP Flexible Super has refreshed its investment menu, including the addition of two new actively managed market linked options, Super Easy Active Balanced and the AMP Capital Dynamic Markets Fund.

Super Easy Active Balanced is a traditional diversified fund that uses both dynamic asset allocation and strategic management to deliver lower cost active management.

The AMP Capital Dynamic Markets Fund uses dynamic asset allocation, providing a flexible investment approach that aims to balance growth and defensive assets in response to changing markets.

AMP Flexible Super will also introduce a 3 month Term Deposit, giving customers’ greater flexibility to pick and choose cash options to suit their needs.

The new investment options add to AMP Flexible Super’s diverse investment menu to meet the needs of customers with different account balances, risk profiles and liquidity requirements.

Super Protection will be compliant with the incoming Superannuation Industry Supervision (SIS) reforms which take effect 1 July 2014.

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The new product called Income Protection Plus will offer applicants the choice of a Rate Saver or Time Saver plans. The Rate Saver product is designed for people who have the time to answer detailed health and lifestyle questions in return for more features, including higher cover, lower premiums, shorter waiting periods and longer benefit periods. InsuranceLine expects the Time Saver product to appeal to those people who want cover but without spending the time to answer lengthy questions upfront. 

Income Protection Plus features the option to extend cover to stay at home mums and dads, providing up to $3000 per month in the event they are unable to perform their regular duties around the home. Additionally this will cover people working in sectors such as mining and resources who may have previously found it difficult to obtain cover.

Historically many income protection products have excluded stay at home mums and dads and those working in an industry such as mining and natural resources.

It will also offer policyholders involuntary redundancy cover which provides three monthly payments of up to $3,000 in the event a policyholder loses their job.  The cover on the new product also extends to SME owners should their business be declared insolvent. 

John Hoyle, CEO of InsuranceLine, commented: “For too long there has been a one-size-fits-all approach to income protection in the direct insurance market and we think it’s time to give people greater flexibility to choose the level of cover and the features and benefits that best suit their needs.

With all the health issues and risks today, InsuranceLine is providing access to this important protection for more Australians. This new product is innovative and responds to the changing needs of consumers.  We know that it is important for people to be able to make promises to their family to protect and provide for them in all eventualities and this new product enables Australians to do just this.”

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AMP’s Director Group Wealth Protection Rob Bergin said AMP Group Insurance builds on the strengths of the AMP and AXA stand-alone group insurance offerings and reflects a combined strong track record in helping businesses prosper and members protect their families.

“We had a look at what was working well in both operating models and are pleased to bring this new offer to the market,” Mr Bergin said.

“Group insurance plays an important role in the battle against underinsurance and AMP Group Insurance ticks all the boxes – competitive and flexible products, accessible underwriting and smooth administration and claims processing.

“AMP is now providing group insurance to more than 1.2 million Australians and in 2011 AMP paid almost $210 million in group insurance claims, giving us the scale and experience to cater for a diverse range of members.”

AMP Group Insurance has a range of enhancements and new product features available to new business, including automatic cover for new employees, under certain conditions. Mr Bergin said AMP Group Insurance offers Total and Permanent Disability cover and Salary Continuance when a non-work related illness prevents an employee from attending work on the their first day of eligibility for cover, usually the first day of work.

“AMP understands injury and illness can happen at any time. Providing cover for illness on day one will give people who are absent from work due to minor illness automatic insurance without the need for underwriting.”

This is in addition to immediate Death and Terminal Illness cover which AMP Group Insurance provides for all causes – work or non-work related health issues.

AMP Group Insurance brings together the superior features from the existing stand-alone AMP and AXA group insurance products, such as a minimum plan size of 10 and relaxing underwriting requirement for larger plans.

Mr Bergin said offering a low minimum plan size means AMP Group Insurance can fulfil the needs of small groups of employees and cater to the unique requirements of a selected group of employees within a bigger business, such as executives for which specific employee benefits need to be provided for retention or attraction purposes.

Underwriting requirements have been removed for the new AMP Group Insurance plans with more than 20 members for benefit increases of more than 30 per cent in 12 months, covering changes of employment such as receiving a salary increase or moving from part-time to full-time work. AMP Group Insurance is open now to new business.

The existing AMP and AXA-branded stand-alone group insurance products are now closed to new business. Mr Bergin added: “AMP will continue to review benefits provided to existing members on an ongoing basis to ensure their group insurance solution remains compelling and relevant. We will continue to work with advisers, brokers and research houses to deliver to the needs of our membership.”

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AMP’s Head of Product On-sale for Retail Wealth Protection John Ashton said changing work patterns, family structures and business practices, as well as ever improving medical care, means insurance solutions need to be continually updated to remain competitive.

“We know the importance planners and advisers place on making sure their clients’ insurance cover stays relevant and up-to-date, which is why we continually work on developing enhancements to our insurance offer,” Mr Ashton said.

“In a world where not every client will be getting married in the traditional sense, we’ve adjusted our Guaranteed Future Insurability (GFI) feature to allow de facto couples to increase their cover more easily.”

GFI is a feature that makes it easy to increase cover at key times in a person’s life, such as having or adopting a child and becoming a carer for the first time, without having to provide any evidence of health status.

AMP has also changed its eligibility criteria for FLP’s in-built GFI for Income Protection and Temporary Salary Continuance, which will allow more people to access this feature.

Mr Ashton said this valuable feature was previously only available to people with a clean bill of health but recognising that we live in a world where not everyone enjoys perfect health, we’re now pleased to be able to offer this benefit to a broader range of customers.

“Medical procedures and diagnostic tests are rapidly changing, so we’ve enhanced the trauma definitions in FLP of certain conditions, such as Alzheimer’s disease, lung disease and hypertension, to reflect current medical practices and ensure we are using the most up-to-date medical intelligence when making a claim assessment,” Mr Ashton said.

“Australia has one of the highest rates of skin melanoma in the world, so AMP has enhanced its trauma payment definition to cover early forms of melanoma which will enable many clients to receive valuable financial assistance at an earlier stage of diagnosis.”

AMP has also unveiled service enhancements to make it easier for people to get the cover they need and easier for advisers to do business with AMP.

Mr Ashton said AMP has updated its medical and financial underwriting requirements for FLP, including removing the need for accountants’ signatures on most financial questionnaires and removing specialist medical examinations from the mandatory medical requirements.

The enhancements, which are now live, apply to Flexible Lifetime – Protection, Flexible Lifetime – Super and Flexible Lifetime – Flexible Protection. The changes apply automatically for new clients as well as for clients who currently have insurance under these products.

Mr Ashton added: “AMP continues to support and invest in its two wealth protection product lines, Flexible Lifetime Protection and Elevate, to ensure they offer flexibility, choice and competitiveness.”

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