November 5, 2020
It has been difficult to miss APRA’s frustration at the lack of consolidation amongst super funds. The…
Over the last few years, group insurance has become somewhat commoditised within super – funds have typically been reducing benefits to achieve lower premiums and reduce the impact on member balances. So it wasn’t all that surprising when ASIC’s Consumer engagement in insurance in super (REP 673) released recently found many members don’t know, understand or value their insurance in super.
In addition, last month’s Federal budget saw changes to superannuation that should result in reduced member turnover and the proposed introduction of a somewhat-questionable performance test. While the focus of these proposals has been primarily on fund growth, they also create two flow-on impacts to insurance within super:
As funds respond to these proposals and focus on member acquisition and the proposition to members, the natural focus will be on price and investment performance. However, some funds may also consider this an opportunity to differentiate based on their insurance proposition.
We think this is likely to create bifurcation within the group insurance industry:
Unfortunately, this isn’t likely to make a significant impact on ASIC’s next member research into group insurance in super – the increasingly few who it matters for are unlikely to overcome the majority of members where they cannot see the value of their group insurance.
Instead, these changes probably shift the focus towards personal insurance within super in future.