Damien Mu

The life insurance industry must educate and engage with fund members and employers to ensure successful outcomes for IP and TPD claimants, according to a new survey from AIA Australia.

Superannuation and insurance professionals at the recent AIA Australia Group Insurance Summit were asked for their views on current and future issues in life insurance, and what role an insurer should play in addressing these. Rising premiums overwhelmingly remain the most pressing issue for industry professionals, with 81% saying balancing rising claims with sustainable premiums for members would be the greatest challenge for life insurers.

In addition, 47% of respondents said the most important thing the industry could be doing to address current sustainability challenges was either educating members on life insurance products or the role work can play in rehabilitation. 40% said the greatest challenge to implementing a successful rehabilitation program through their insurer was engaging stakeholders including employers, members and their doctors to participate.

“As insurers we have a role to play by not simply addressing the issue of claims sustainability through continual premium increases,” said Damien Mu, AIA Australia’s chief executive officer. “We need to think more broadly about the ways we manage these claims, so implementing rehabilitation programs backed by comprehensive support, training and education for members and employers needs to be a key capability for group insurers.”

Respondents also believed life insurers should be making more of the advancements in technology and data collection available to them in today’s market. Some of the ways this could be achieved included leveraging data to provide funds with greater insights on employers and members (23%), and allowing members to manage cover online more easily (28%).

“It’s important that the industry make it as easy as possible to encourage members to engage with and learn about their insurance”, said Mr Mu. “We’ve seen recent improvements in online application and claims lodgement, but we need to ensure this level of innovation keeps up with the rapid pace of technological advancements and changing consumer dynamics.”

Insurance education emerged as the primary theme of the survey, with 26% of industry professionals indicating insurers could best demonstrate their value to super funds by educating their members around the claims process. A further 25% said that more creativity and innovation was needed in product design.

“It’s vital that the industry continues to address these issues as we move forward to a more sustainable future”, said Mr Mu. “Life insurers and super funds must continue working together to educate and engage employers and members to ensure group insurance policies remain valuable to Australian’s and they understand what they are getting and how to engage with their insurance”

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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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Gareth Hall

The arbitrary transfer of thousands of personal superannuation accounts to MySuper is already underway and members have absolutely no recourse for any investment losses or life insurance lost as a result.

Corporate Super Specialist Alliance (CSSA) Treasurer, Gareth Hall, said part of the MySuper legislation requires ‘flipped members’ – those who were in a corporate superannuation plan but who are now in a personal superannuation plan – to be transitioned to a MySuper fund by 1 July 2017. “However, APRA has told at least one fund that member accounts which are receiving ongoing contributions have to be transitioned to MySuper now.”

Mr Hall said he spoke with one member who had a superannuation balance of $126,000 and $1,672,000 death and total and permanent disability (TPD) insurance. “He was about to go on extended leave overseas and would have missed the opportunity to opt in to retain his account,” Mr Hall said. “If this member had been arbitrarily transitioned into a MySuper fund, his current insurances would have been cancelled.”

When made aware of the issue, Mr Hall said the member was outraged and elected to remain in his current fund. “Imagine the disastrous outcome for his family if the cover had been cancelled and something went wrong. We believe many members are not aware of the problem and consequently are losing millions of dollars in insurance cover, cover which they may never be able to obtain again.”

MySuper legislation provides no recourse if investors lose a benefit as a result of the compulsory move to My Super. “If these ex-corporate superannuation members do not state that they wish to keep their superannuation arrangements as is, they will all be transitioned,” Mr Hall said. “How can any Government legislate the removal of such important benefits from taxpayers, and offer them absolutely no avenue for compensation?”

With a required notice period of three months, at least one large fund manager has been contacting members to alert them to the problem. “They have had huge success in keeping members in existing arrangements, because these members are engaged with their super and know their arrangements are right for them,” Mr Hall said. “It doesn’t make sense that the first people being transitioned into a MySuper arrangement are those who are the most engaged. Our gravest concern is what will happen to members who are not engaged. What if they have changed address or are on leave and are not able to be contacted? They will just lose out.”

Mr Hall said before the introduction of MySuper legislation, the Death, TPD and Salary Continuance insurance arrangements of members transferring from an employer plan remained intact within personal accounts, as did the members’ investment selection.

“Despite our having brought this issue to the attention of both the Labor and Liberal Governments on a number of occasions, the recommendations from the Senate Committee do not address the issue, nor do they address the conflicted remuneration dilemma that results from corporate superannuation specialists providing advice to their clients,” Mr Hall said. “There are still flaws in the interaction of the Future of Financial Advice (FoFA) reforms and the MySuper legislation that are causing these problems. They need to be fixed – fast.”

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