Sean Williamson, Chief Group Insurance Officer at MLC Life Insurance, has expanded his team with a number of recent appointments that have significant industry expertise in group insurance and strong partnership credentials with superannuation funds and mastertrusts.

These appointments broaden the team’s existing bench strength and include:

Emily Wu – General Manager, Fund Partnerships. Emily is focused on acquisition of new fund partners as well as managing relationships with existing partners. Emily has strong industry experience in group insurance having previously held product and legal roles at AIA Australia and CommInsure. Emily has experience working with large industry funds, master trusts and government funds.

Suzie Brown – General Manager, MLC Wealth and Corporate Partnerships. Suzie’s role will be to manage our largest partner in MLC Wealth and build out our Corporate Distribution capabilities. Prior to joining MLC Life Insurance, Suzie was the General Manager of Distribution at Integrity Life, and has management experience with large industry superannuation funds, master trusts, platforms and corporates.

Craig Harrison – General Manager, Product, Pricing and Proposition (Group). Craig will lead our Group Product and Pricing functions and brings extensive leadership experience and relationship building skills with funds. Craig also previously led CommInsure’s group insurance business, managing relationships with major industry fund and master trust clients.
The new appointments support the company’s ambition to partner with superannuation funds, underpinned by better digital capabilities and a deep knowledge of the issues affecting life insurance inside superannuation.

The company’s LifeView digital platform continues to be rolled out to fund partners and their members. Accessible via any device, it enables superannuation fund members to self-service such as applying for and increasing their cover online, and lodge and track the progress of claims. It also allows trustees and administrators to access real time data and analysis of their funds’ claims experience.

Sean Williamson said: “Insurance inside superannuation is experiencing significant change in light of COVID-19, and we need to ensure we’re providing the right support and expertise to superfunds as they navigate their way through this period. Our goal is to play a larger role in the group insurance market and genuinely challenge the more established group insurers.

“To do this we need to build our expertise and partnership credentials, and we’re thrilled to appoint Suzie, Craig and Emily to our team. They have partnered with some of largest industry and retail superannuation funds and know what it means to see issues through the lens of our funds, trustees and members. “

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Suzie Brown

Royal Commissions, inquiries and investigations have resulted in scores of negative headlines about the financial services industry. While the tide is starting to turn and the industry seeks to rebuild trust, it would still be reasonable to think that, as a new life insurance company, customer distrust would be the biggest battle we, and the advisers we work with would face when communicating the importance of life insurance. So, we asked advisers what their customers are saying – and the results were surprising.

When the advisers we work with spoke to everyday people about the obstacles that prevent them from having adequate life insurance, the answers were varied.  We found understanding of life insurance is low and confusion is high. Very high. We heard people often don’t see their income as an asset until its converted to something they can see and touch. Some also thought they might have life cover through their superannuation as this rings a distant bell about something they signed, somewhere, some time ago. Most worryingly, others think health insurance will be their saviour should they need TPD cover.  This lack of understanding leads many to thinking life insurance is just not necessary.

We heard from advisers that some people relegate life insurance to the “graveyard” lists of things they hope to do, but in reality it’s the place where tasks go to die rather than get done.  This is the “too hard basket” or the “too complicated basket” or the “takes too long basket”.

Advisers confirmed to us that most people are convinced they are not going to die suddenly, unlike all of those other people who die suddenly. They plan to die with adequate notice and therefore plenty of time to update their life insurance (and the playlists of songs they really want at their funeral).

Working at Integrity Life means I have no excuse not to have life insurance as I see the value day in, day out.  For other people a major milestone will serve as a trigger or sometimes a tragic story will spur people to act and take out life insurance. Knowing their family will be taken care of often shifts people into action and moves insurance up the list.

Life insurance is being made simpler with technology that helps advisers to explain things like premiums and coverage.  We are leading this new wave of simplicity that will help advisers to demonstrate value of life insurance. Getting this right is key to protecting people and their families and reducing underinsurance.

By Suzie Brown, General Manager

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Suzie Brown

Australian life insurer, Integrity Life, is urging Australians to check their life insurance cover inside superannuation before the enforcement of new laws on 1 July 2019.

As part of the Protecting Your Superannuation Package reforms, a superannuation fund member’s life insurance will be cancelled if their superannuation account is inactive, unless they elect to retain the insurance.

According to Suzie Brown, General Manager, Distribution, Integrity Life, some superannuation fund members are at risk of losing important insurance that could provide them with income protection, total and permanent disability insurance (TPD) or life cover if they do not act quickly.

“There are Australians who may not be aware of how the upcoming changes to life insurance within super will affect them and their ability to financially protect themselves or their loved ones when they need it most,” said Suzie.

“The new rules apply to inactive super accounts, that is, those accounts that have not received a contribution in the past 16 months. For people who haven’t made a personal contribution or received mandatory employer contributions to their super accounts for 16 months or more, they need to be aware that they will lose their cover if they don’t take action by 30 June 2019.

“Also, the Australian Taxation Office will have the power to consolidate inactive super accounts with a balance below $6,000, so anyone with a super account should spend time understanding how these changes will impact them,” said Suzie.

All super funds were obliged to write to affected members informing them of the changes by May 1, yet the industry believes not enough super fund members are acting.

“Despite the fact that super funds have communicated with people about the changes, the tight time frame means that there isn’t much time for people to opt-in to insurance. That is, to let their fund know that they want to keep their life insurance cover,” explained Suzie.

While some funds may reinstate cover lost through the consolidation of low-balance, inactive super accounts, super fund members will be required to reapply for their life insurance and likely provide updated health and lifestyle details. If the member’s health or circumstances have changed since they first opened their super account and received insurance, they may not be eligible for the same cover they previously had.

“If superannuation fund members receive a letter or email from their fund asking them to ‘opt-in’ to their insurance, but don’t respond by June 30, the cover will be cancelled from July 1. Inaction, confusion, or simply not checking notifications from your super fund are some of the reasons why people may not realise they’re in danger of losing their insurance. That’s why it’s so important for people to pay attention to communications received from their super fund and to make deliberate decisions,” said Suzie.

In conclusion, Suzie reiterated the importance of life insurance: “The purpose of life insurance is to provide protection for those times when the unthinkable happens. If you are unsure how much insurance you might need should you experience a major health incident, or worse, it can be a good idea to seek professional advice, either through your super fund or from a professional risk adviser,” said Suzie.

Top tips from Integrity Life to prepare for the Protecting Your Super Package:

• Check whether you have any inactive superannuation accounts by visiting MyGov and linking to the ATO.
• For any inactive accounts, contact your superannuation fund, check your statement or access your online accounts to check your insurance cover.
• If you decide to retain your life insurance within any inactive super accounts advise your Superannuation Fund by 30 June 2019.
• Read all letters and/or emails from your superannuation fund and contact them with any questions.

How can impacted Australians avoid losing their insurance within superannuation?

• Contact your super fund and elect to keep your cover
• Make a contribution into the inactive account before 1 July
• Make sure you read all letters and emails from your super fund.

Summary of the changes effective July 1, 2019:

• Insurance cover cancelled for inactive accounts, i.e. accounts that have not received a contribution for a continuous period of 16 months and the member has not elected to retain their cover.
• Inactive super accounts with balances below $6,000 will be consolidated.
• Fees for low balance accounts ($6,000 or less) will be capped at 3% p.a.
• Exit fees will be banned across the board.

Summary of the changes effective July 1, 2019:

Insurance cover cancelled for inactive accounts, i.e. accounts that have not received a contribution for a continuous period of 16 months and the member has not elected to retain their cover.
Inactive super accounts with balances below $6,000 will be consolidated.
Fees for low balance accounts ($6,000 or less) will be capped at 3% p.a.
Exit fees will be banned across the board.

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Why are Australians so under-insured?

Life insurance and financial services are very much in the spotlight at the moment. The controversy can make it easy to overlook the very real benefits that life insurance provides.

Here, Suzie Brown, General Manager for Distribution at Integrity Life, outlines some of the key considerations for financial advisers when making life insurance recommendations and an overview of the upcoming legislative change – for advisers who are new to the life insurance space and looking to help their clients navigate this sometimes complex world.

What are the different types of life insurance?

We tend to think of life insurance as a payment made to a beneficiary upon death. However, the category of insurance commonly referred to as ‘life insurance’ provides a number of different types of cover: death cover, total and permanent disablement (TPD) cover, trauma cover and income protection cover. The key features of each are as follows:

Death cover

Also known as ‘term life insurance’ or just ‘life insurance’. Death cover pays a benefit upon the death of the insured person. This amount can often also be paid out before death, where the insured person is terminally ill. The benefit is paid to the beneficiaries nominated within the policy or to the estate. Where this cover is held within superannuation, the Trustee of the Fund can have input as to who receives the benefits.

Total and Permanent Disablement cover (TPD)

TPD insurance covers the cost of rehabilitation, debt repayment and the future cost of living if the insured person is totally and permanently disabled and unable to work.

The intention of this benefit is to pay an amount when a person will never ever work again. However, whether or not a client is deemed totally and permanently disabled depends upon the definition within the policy. These can vary from policy to policy, but usually fall into two categories:

• the insured person is unable to work in any occupation; or
• the insured person cannot work in their usual occupation.

Trauma cover

Trauma insurance provides cover where a person suffers a specified illness or injury, for example cancer, a stroke or a broken leg. Trauma insurance is also referred to as ‘critical illness’ or ‘recovery insurance’.

This cover pays a set amount, sometimes dependent upon the severity of the illness or injury – for example, the benefit would usually be larger for a severe stroke as opposed to a broken leg. The benefits are intended to cover items such as medical costs (over and above what health insurance will pay), an income stream if it is not possible to work, and the on-going cost of therapy and/or transport costs, as well as adjustment to housing and repaying debts.

Income protection

Income protection insurance replaces income lost through an inability to work due to injury or illness.

Income protection insurance can differ widely, and each policy will have its own definition of disability and range of benefits. In general terms there are two types of cover – one that pays an indemnity benefit, or what you are earning at the time of the claim, and a second which pays an agreed value, determined when you apply for the cover.

The maximum covered is typically 75% of gross wages. The benefit is deliberately designed to be less than 100% of wages, to encourage people to return to work.  Benefits are paid until recovery, up to a maximum time period, defined as a number of years, or until the person reaches a certain age.

How is life insurance structured in Australia?

Australians can access life insurance in three ways, and as a result, the industry is split into three distinct channels as follows:

Retail

Individual insurance policies purchased through an adviser (either a financial adviser or a risk adviser) are known as retail insurance. It is also known as advised insurance, because it usually involves the client seeking advice prior to purchase.

Detailed health information is provided in order to take out the cover, and the price will be in some part dependent upon the risk the individual represents – due to their health, pastimes and occupation.

Group

Group insurance is where multiple people are insured under a single contract. These ‘groups’ are usually employees of an employer or the members of a super fund. Group life insurance is the most common way for Australians to hold life insurance. Most Australians hold this type of cover which they receive automatically via their super fund.

Group insurers do not collect detailed information on each person insured, but rather make assumptions about the occupations and health of the group as a whole. As a result, group insurance can often be cheaper than retail. Due to the lack of individual risk rating, this type of insurance is advantageous for people who may not be able to obtain retail insurance – such as those in high risk occupations or with serious pre-existing health conditions, who may be denied cover during the retail underwriting process.

Life insurance purchased through a superannuation fund can however be less comprehensive than that purchased directly, in terms of amount of cover and the types of benefits offered and may not be adequate depending on the policy holder’s needs.

Direct

Life insurance purchased directly through an insurer is known as direct insurance. This kind of insurance is sometimes referred to as non-advised, because no personal advice is given. This type of cover is often purchased over the phone, via either inbound or outbound calls. For this reason, direct policies tend to be simpler.

Underinsurance is a major problem in Australia

Life insurance is an essential pillar of a financial plan, particularly for families, because most of us would struggle to pay our bills if we found ourselves unable to work, due to illness or injury. Yet despite the fact that 94%[1]  of working Australians have some level of death cover (usually through their superannuation fund), the amount is often woefully inadequate. The same goes for both TPD and income protection cover.

In its latest research into life insurance cover in Australia, Rice Warner[2] estimates that the insurance needs of a 30-year-old couple with children are:

• eight times family income for death cover;
• four times family income for TPD cover; and
• 85% of family income for income protection cover.

The reality is that median levels of death cover in Australia are around only two times family income. TPD cover rates are around three rather than four times family income, and income protection cover is usually 75% of income, rather than 85%.

This means that if the average Australian were to claim on their death cover, less than half of their family’s basic needs would be met, and they would receive less than 30% of the amount required by their family to maintain their standard of living.

Why are Australians so under-insured?

A common misconception in the market is that life insurance is unnecessary, because health insurance provides the same cover.

While health insurance covers certain healthcare costs, including doctors’ expenses, the cost of going to hospital and some medicines; it does not cover other living expenses. This is where life insurance comes in. Living expenses do not stop, and more often than not they can increase, due to the need to bring in outside help, when someone is ill or injured.

Peoples’ knowledge about insurance is also generally low, making purchasing decisions without help difficult.

Your role as an adviser is crucial

Financial advisers are frequently on the front line – dealing with clients of a daily basis, and in a position to educate them about the options available to them, and to guide them as they make more informed choices about financial protection. It’s tricky though, because conversations about life insurance, disability and income protection can be difficult to have -people don’t tend to want to spend time contemplating their own death, and everyone think these things only happen to someone else. Bringing this topic to the forefront of discussions is therefore a key part of an adviser’s role.

Navigating the complexities is the other key role for an adviser. Understanding what is and isn’t covered, what is excluded and included, and even how much is needed is challenging for most clients. Policy conditions and features are (by necessity) covered in detail in a Product Disclosure Statement (PDS). However, many life insurers are not great at presenting the information in an accessible way. Most life insurance PDSs are dense, lengthy and complex documents – that make understanding and comparison between products difficult.

This is where clients will rely on you to guide them regarding what they need, how much they need, and being able to walk away from purchase actually understanding what they have just bought.

The regulatory landscape for life insurance: upcoming changes

There are a number of key changes that could affect your clients’ cover over the next few years. Awareness of these changes can help set up your clients to weather the upcoming storm.

Federal Budget changes to insurance in superannuation

In May 2018, then Treasurer, Kelly O’Dwyer, announced a range of measures that would reform insurance within superannuation. While the changes are not yet law, they have the potential to affect the level of cover that super fund members receive and may mean that some are left underinsured or need to look at their options for a policy outside super.

The key change is that insurance within super will become opt-in (rather than default or opt-out) going forward, for members:

• under 25;
• with balances under $6,000; and
• whose account has not received a contribution for 13 months (‘inactive’).

For members with account balances under $6,000 and those with inactive accounts, cover will be removed (if they don’t elect to keep it in writing) when the changes are implemented. Ongoing, all types of cover (voluntary and default) will be removed where a members account becomes inactive. The start date of these changes is unclear.

These changes will have unintended consequences for younger members who do have families that need the support of insurance cover, and those who may be unable to get opt in cover due to higher risk occupations or health issues. Exemptions for members in these situations have been requested by various industry groups but may or may not eventuate.

Productivity Commission changes to insurance in super

In December 2018 the Productivity Commission released its final report on the efficiency of Australia’s superannuation system. The report included recommendations for the way insurance inside superannuation is managed, as well as who is insured through their super. Key findings included:

Multiple and duplicate insurance policies are eroding the balances of members;
Superannuation trustees need to do more to provide value for money in insurance and prevent fees eroding balances; and
fees from duplicate insurance is “by far the most egregious driver” of super funds’ balance erosion.

The Productivity Commission recommended:

A public inquiry to be held within four years, examining whether life insurance should be included within superannuation on a default basis;
An overhaul of the Life Insurance Framework, directed by APRA and ASIC; and
Endorsement of the Government’s proposed changes to insurance in superannuation, as outlined earlier.

Royal Commission final report recommendations

On Friday 2 February, Commissioner Kenneth Hayne delivered his final report and recommendations on the Banking Royal Commission, following his year-long review of the financial services sector, including life insurance. These findings were released on 4 February.

The recommendations on life insurance included:

• The removal of the exemptions on commissions on the sale of life (and general) insurance. However, these changes would depend on a review of the sector by ASIC in 2022, meaning there would be no immediate changes.
• The removal of commissions on all insurance products, including life insurance.
• The banning of phone sales or ‘hawking’ of insurance.
• The reclassification of funeral insurance as a financial service, meaning it now falls under ASIC’s regulatory regime.
• More oversight of the group life insurance market.
• Consumers to be better protected via an amendment to the Insurance Contract Act, replacing “duty of disclosure” with the “duty to take reasonable care not to make a misrepresentation to an insurer”

Key considerations for advisers

There are many questions which need answering before you can be sure you have recommended the right insurance cover for your clients. Key questions are:

• What level of health insurance does your client have? In the event of serious illness or an accident, what will be covered over and above what Medicare offers? Will life insurance need to supplement medical costs or is this already covered via private health insurance?
• Are ancillary benefits important? For example, some policies will offer travel assistance so loved ones can be by your side and even counselling services and financial planning services to manage benefit payments. What level of support does your client have around them and what will need to be funded when they are ill or injured?
• What other family members rely on your client? What support will they need?
• Are rehabilitation benefits covered under your income protection policy – are they wanted?
• What is excluded? There are typically three kinds of exclusions.
  • Outright exclusions that apply to everyone, for example non-payment if the cause of injury or illness is suicide.
  • A general exclusion in relation to any condition that already exists when cover is taken out (called a ‘pre-existing condition exclusion’).
  • Specific exclusions may also apply where the client has been medically underwritten for cover. For example, the client has had previous back surgery, so their cover excludes all future back related conditions.
• Are stepped or level premiums a better fit? Stepped premiums start low and rise over time as the risks associated with the policy rise with the age of the policy holder. Level premiums do not change over time, but typically start higher.
• Is insurance inside or outside superannuation better for the client’s circumstances? The source of premium payments and the tax consequences of benefit payments need to be considered.
• What is covered by any group policies, particularly through superannuation? How do any additional policies work together? A key issue for many clients is that they have cover via a number of superannuation accounts. This can cause issues in relation to income protection cover in particular. These polices pay a maximum of up to 75% of income and will offset other policies providing similar income benefits. Care needs to be taken that members don’t hold a number of these policies, some of which may yield zero benefits at claim time due to offsets.
• What happens to life insurance if your client moves super funds, or starts an SMSF? Will the life insurance come with them, or will they need to actively move the insurance in order to maintain continuity of cover?
• What could be the outcome for your client if the proposed budget and productivity commission changes are implemented? Will your client lose cover? It is likely many client’s arrangements will require review at this time. Preparation now could relieve workloads when these changes occur.

By Suzie Brown, General Manager for Distribution

———

[1] Rice Warner: Underinsurance in Australia 2017
[2] Rice Warner: Underinsurance in Australia 2017

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Chairman Eric Dodd said: “Heinrich’s extensive leadership and sector experience ideally complements the expertise of my fellow Board members, and will be of great value to Integrity as it progresses from new entrant to established market player. We are very pleased to welcome Heinrich and look forward to leveraging his industry insights.”

Commenting on his new role, Heinrich said: “I’ve been watching the development of Integrity Life with interest, and greatly look forward to working with MD Chris Powell, Eric and my fellow Board members on this exciting mission which aligns with my values and my aspirations for the industry.

Heinrich joins Integrity after a 36-year career at Munich Re Group, where he spent the last decade as Managing Director, Australasia. He has held various directorships and adviser roles in insurance companies, underwriting agencies, insurance and reinsurance brokers.  Heinrich has also served as a director of the Insurance Council of Australia and ANZIIF.

Talent investment

Integrity also announced two senior hires, with Mark McCrea appointed as Operations Manager and Jacqueline Little as Head of Product.

Joining from Clearview Wealth, where he held the positon of Head of Operations, Mark brings 25 years’ worth of experience in financial services – predominantly within life insurance – with a specialisation in operational transformation and implementation.

Previously National Manager for Product Policy at ANZ, Jacqueline will leverage her extensive expertise in product development and strategy to ensure Integrity’s offering is constantly reassessed and refreshed, to continually meet advisor and client needs.

Managing Director Chris Powell said: “We are delighted to welcome Mark and Jacqueline to the team. Alongside sector specialists Suzie Brown (General Manager of Distribution), Les Jones (Head of Group Risk Distribution), Andy Todd (Head of Information Technology) and Michael Tuffy (Chief Operations Officer), we benefit from some extraordinary industry talent, all of whom share the vision to provide life insurance as it’s meant to be.”

Integrity already offers group insurance and is set to conduct a pilot of its retail products with a group of 50 specialist insurance advisers in mid-October.

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