Staying ahead of changes in the regulation of insurance through super

At Money101, we’re always looking for ways to help our partners navigate regulatory changes that touch on member education requirements. And this year, there have been more than a few announcements and releases that have caught our eye. Earlier in July, the Productivity Commission released an issues paper on stage 3 of the epic multi-year public enquiry in to the competitiveness and efficiency of our super system. It contained a few points and phrases that really got the community talking about the changes that might be in store for the current system – which itself has been in place for less than a decade.

“The Commission should consider the appropriateness of the insurance arrangements inside superannuation, including:

• the impact of insurance premiums on retirement incomes of both default cover and individually underwritten cover funded inside of superannuation;
• the extent to which current policy settings offset costs to government in the form of reduced social security payments;
• whether policy changes could improve default cover through superannuation, so that default cover:
• provides value-for-money;
• does not inappropriately erode the retirement savings of members of all ages; and – delivers consistent outcomes across the system; and
• whether policy changes are needed to ensure that insurance is not a barrier to account consolidation.”

In other words, we could be headed back to an opt-in system, at least for some segments of members. The Minister didn’t do anything to curb this chatter when she literally told Ross Greenwood at 2GB that “the Government has asked the Productivity Commission to look at (…)the issue around the impact of insurance premiums on retirement incomes, particularly for those people, young people, and whether in fact we ought to have opt in rather than opt out arrangements.”

And that’s just the start of it. In the description of the case study evidence that the Commission want industry participants to submit, they’ve asked for details on funds’ member information and lessons. We think it’s likely that they’ll want to be able to see something concrete that represents a consistent experience for all members. That’s why we’ve developed a new product that addresses this need for objectivity (but more on that later).

It all follows on from the Commission’s assessment framework, first released in stage 1. They’re looking for evidence in member survey data of “member knowledge and understanding, including superannuation and insurance literacy.” Further, members’ financial literacy around super and insurance is described as a common indicator to both the competition and efficiency of our super system.

Along with the updates to disclosure rules already released by ASIC (let’s not get in to RG97 here…), there’s a fairly clear indication of where the regulatory environment is headed. One, funds are going to need a dynamic and effective way to educate members on their insurance rights and options. And two, if funds want to attract the business of younger members who enter as opt-in members, they’ll need to create a strong sense of trust – partly via engaging, no-nonsense, jargon-free content.