The Mercer Super Trust’s new insurance partner AIA will deliver a range of great outcomes for members insured under the MST umbrella policy. But the work doesn’t stop there. We caught up with Mercer’s Insurance Product Leader, Princess Navarro to learn about the important role Mercer is playing in the Insurance in Superannuation Industry Working Group (ISWG) to make insurance a simple and more user-friendly product for members when they need it.
Why is insurance an important product for superannuation members and what advantages do master trusts have over individuals in negotiating premiums?
Princess: Every working Australian has a retirement outcome they hope to achieve based on what they’ve contributed to their superannuation each year until the day they retire. But what if that retirement journey is interrupted unexpectedly? Insurance offers members and their loved ones protection from the unknown. A good example is when a person becomes ill or injured, their ability to work at full capacity or at all has a huge bearing on their future wealth. Insurance secures that person’s projected retirement outcome and, in the case of death, ensures family receive ongoing income for what an individual can no longer provide.
For individuals, insurance in superannuation can be more generous than through a retail policy. Particularly with Master Trust arrangements, the eligibility is aligned with their employment conditions and therefore the levels of automatic cover are much more generous and can be accessed without having to provide satisfactory evidence of good health.
What is the main objective of the Insurance in Superannuation Industry Working Group (ISWG)?
Princess: The ISWG was formed in November 2016 to help the superannuation industry stay true to the broader purpose of insurance. In practical terms this means developing a Good Practice Guide and a Code of Practice for Superannuation Fund Trustees. The group has a great representation of subject matter experts from various industry bodies, including superannuation funds, insurers, and Industry and consumer representatives. Together, we identify the key issues, policy and process developments that will make insurance easier for members.
What are some of the current problems superannuation members face around insurance?
Princess: Over the years, the development of inconsistent terminology has created a lot of confusion. For example, Income Protection can be known as Total but Temporary Disablement (TTD), Salary Continuance Insurance (SCI), Temporary Salary Continuance (TSC), Total Disability Insurance (TDI), Group Salary Continuance (GSC), Long Term Disability (LTD), and so on.
Also, the use of industry jargon has taken hold where, to use the example of Total and Permanent Disablement, words like ‘unlikely’ or ‘unable’ or ‘incapable of working’ can translate into premium differences of more than 5%. Understandably, members are not aware of these differences.
Another common issue is some members have duplicate income protection insurance arrangements outside of their superannuation. They are not aware they will generally only be eligible to be paid under one of those policies and therefore don’t need to be paying for both.
What is Mercer’s main role within the group and what perspective do we provide that might be different to others?
Princess: Mercer is an active participant in the ISWG, and is also represented in the group’s Code Committee. Through our strong relationships with insurers, experience in administering large superannuation funds, and resident subject matter experts in Insurance and Claims Assessment Services, we are uniquely positioned to provide first-hand information of the big issues facing trustees and members.
What improvements do you think we will see to industry practice?
Princess: There’s a lot of work to be done. It is great to see the industry coming together to work through the issues with members’ best interest in mind. Firstly, I think a standard set of member friendly language will help members understand and compare their insurance arrangement better. We also need an improvement in claims handling with prescribed benchmarks on time frames and enhanced communication during a claims process.
These two improvements will help solve a lot of the complaints received by the SCT, which are often in relation to a lack of communication, particularly around members going through the assessment process.
What are the long-term benefits that will flow through to superannuation members?
Princess: We can only get better at this. Communication is one of the key elements of any superannuation offering. There are a lot of numbers and words to convey and this makes it very complex and difficult for members. Despite all that technology has to offer, the insurance industry is still very document based, with paper based application forms and policy documents and medical evidence all still often transacted in hard copy document form. This needs to change. And if we can’t change it soon enough, then we need to find a way to personalise the experience and transaction and make it easier for members to understand.
Is there anything else employers should know about in terms of their role or the timings of this project?
Princess: There are a number of sub working groups working on various discussion papers. To date, we have already seen three discussion papers released and we are expecting two more to be released through June-July.
Please contact your Mercer representative for more information about this topic.