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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In a statement likely to have lasting implications for the financial advice and superannuation industries, AustralianSuper today declared that the FoFA reforms have created an environment in which the Fund and selected planner groups can work together in the interest of members.

The dramatic shifts in the advice and superannuation environments in the wake of the Cooper Review, the Ripoll Report and now the FoFA reforms, will lead to a shift in how Industry Super Funds and advisers work together, provided the FoFA reforms proceed in full. Although traditionally cast as enemies, according to Ian Silk, Chief Executive of AustralianSuper, the two groups should have strongly aligned interests.

Certainly the strong positive outcomes of a continuing trial involving AustralianSuper and a panel of representatives from some of Australia’s leading advice firms and dealer groups provides evidence of this.

“For the past twelve months or so we have been working with advice industry leaders trialling and building a new service that will enable us to work together more effectively and in the best interest of members,” said Mr Silk. “This includes addressing the vexed question of fees and other issues that have presented stumbling blocks in the past. Thus far in the trial we have worked through a number of these issues and will continue to do so as the trial continues over the next nine months or so.

“AustralianSuper has always been a major supporter of good, sound advice. What we do not support is the commission structure of so many super products that leads to conflicted advice. As we look towards new, clearer legislation relating to commissions and requiring an adviser to act in a clients best interest, we are seeing many of the more progressive advisers working to build fee-for-service and other models of advice into their practices.”

Mr Silk went on to say that AustralianSuper has always focused on providing better value super through lower fees and strong long term performance and by breaking down the wall with advisers more people will now have more money in their retirement.

“Essentially we see this as part of our broader advice strategy, along with our member education programs, online and workplace seminars, our call centres and the fund’s strong relationship with Industry Fund Financial Planning.”

Mr Silk said that, for advisers, the trial has opened wider possibilities for advising and meeting the needs of their clients, potentially saving clients tens of thousands of dollars in fees, enabling access to a leading fund and giving advisers more control over a client’s full portfolio.

“This may not have been as simple at a time where industry super funds and advisers essentially occupied separate worlds, so where a client held super outside the adviser’s remit, the adviser may not have had such an opportunity.”

Firms which have been participating in the trial include Godfrey Pembroke, Matrix Planning Solutions, Dixon Advisory, Woods & Partners, Paul Moran, Switzer Financial Planning. They have also identified a number of advantages of the approach so far.

Tom Reddacliff, General Manager of Godfrey Pembroke said, “We are delighted to be working with AustralianSuper and believe this strategic alliance benefits our two organisations, advisers and most importantly members.

“Godfrey Pembroke was the first major licensee to introduce fee-for-advice on all new investment and superannuation clients back in 2006. Our advisers believed this was in the clients’ best interests and was the right thing to do.

“This commitment to fee-for-advice closely aligns our organisations and makes Godfrey Pembroke a natural provider of trusted financial advice to AustralianSuper members. Furthermore, Godfrey Pembroke guarantees it will not receive a single cent of commission from any AustralianSuper member.”

Another participant in the trial, Rick Di Cristoforo, Managing Director of independently owned advice firm Matrix Planning Solutions, said “Matrix has always been committed to providing quality advice, including administration and product solutions that are best suited to our clients’ needs.

“Our research confirms our belief that industry funds can play an important role as an efficient and competitive superannuation solution for a wide cross section of working Australians, and in our view, AustralianSuper is a clear market leader.

“We are delighted to be working with AustralianSuper as part of this advice partnership.”

As the trial continues, the focus is on continuing to resolve various logistical issues associated with ensuring a smooth and workable proposition for all concerned.

Ian Silk further states, “What we are most pleased about is that the fundamentals are sound. We have the ingredients and commitment we need to meet our mutual aims and that can only be the start of a very good thing for members.”

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