New report flags ways to improve insurance in super

Australia’s current insurance in superannuation setup can be further improved in two areas to strengthen member outcomes, a joint report from the Association of Superannuation Funds of Australia (ASFA) and Deloitte has found.

The first is better use of member data to target better benefits and the second a greater focus on wellness and return to work, according to the report, The Future of Insurance through Superannuation.

In relation to the first, the report says better access to member data and using this to design better policies would “improve the value for money” of policies.

If taken up, the proposed move addresses the problem that the “average” level of default cover may not be the right level for many members, as found by the Productivity Commission in 2018.

The report says better access to and use of member data such as age, income and dependents could lead to better coverage of around $1.2 trillion dollars, equivalent to 34% of total sum insured across life, total and permanent disability (TPD) and income protection.

“In order to reap these benefits, insurers will need access to this data,” the report says. “Collecting the data required to better match insurance coverage requires cooperation between government, trustees, insurers and members.

“It also requires insurers to design better policies while maintaining the benefits of group-rated insurance.”

On the second recommendation, the report says insurers and trustees can play an important role in supporting individuals to return to work when it is appropriate to do so.

But current regulatory and legislative restrictions prevent insurers and trustees from paying for certain types of treatment or for funding out-of-pocket expenses that members with insurance often face through the healthcare system.

The report says it considered two scenarios to improve access to treatment and services.

The first relates to removal of legislative barriers to provide broader access to treatment and services, allowing insurers and trustees to provide treatment and other services to all members who claim.

The second will permit insurers and trustees to not only provide broader access to treatment and services but provide faster access through early intervention.

Analysis carried out as part of the report’s review of the current setup finds 11% of income protection insurance claimants who access rehabilitation treatment services are likely to return to work where they otherwise would not have.

The report says broader access to treatment could assist an estimated 29,300 members to return to work over the first 40 years. And once transitions back to the workforce and retirement are accounted for this would yield an additional 4400 full-time equivalent workers to the Australian economy by 2062, boosting GDP by around $1.1 billion in that year.

The report says the current system is relatively efficient compared to other types of insurance but points out there remain opportunities to refine insurance in super to strengthen outcomes for members.

“Insurance in superannuation provides a safety net to support members who suffer an insured event, but under current legislation insurers are limited in how they can help members improve outcomes and return to work,” the report says.

“It is important to remember who the biggest winners are from these changes – those suffering from injury or illness that can be improved or prevented by greater access to treatment and health services.”

TAL Group CEO and MD Brett Clark says the report “identifies opportunities to make further improvements to this world-class system”.

“We are committed to working with our superannuation fund partners and other stakeholders to provide even greater value and support for the members we protect,” he said.

Click here for the report.