Group insurance premiums are likely to continue to rise as insurers struggle with increasing claims, an industry survey has predicted.
Conducted by AIA Australia at its recent Group Insurance Summit, the survey asked attendees to identify the most pressing issue for insurers and insurance professionals. An overwhelming 81% of respondents said balancing rising claims with sustainable premiums for members would be the greatest challenge for insurers in the coming year.
According to Rice Warner, super fund insurance premiums increased by an average of 14% between November 2013 and June 2014. Further, a comparison of average premiums for death and TPD cover for super funds versus retail products showed the margin between group and retail has narrowed substantially (see: Group and Retail Prices Converge).
However, the Australian Prudential Regulation Authority (APRA) has warned that continually increasing premiums in the group market is unsustainable, and could lead to tension between funds and their insurers. In its 2013 Insights report, APRA observed that while insurers had been able to offer super fund trustees changing benefit designs and improved customer service to offset concerns from members about increased rates, this strategy was likely to be ‘nearing exhaustion’.
‘It now seems that trustees are redirecting their attention to the impact that the cost of insurance premiums are having on members’ retirement benefits, particularly as prices increase,’ the report stated.
AIA Australia CEO, Damien Mu, said the survey findings indicated insurers needed to think outside the box when it came to managing claims, rather than simply relying on price rises.
We need to think more broadly about the ways we manage these claims
“As insurers we have a role to play by not simply addressing the issue of claims sustainability through continual premium increases. 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,” Mr Mu said.
47% of respondents agreed with Mr Mu’s position, saying that educating members on life insurance products and the health benefits of returning to work was the most important thing the industry could do to address sustainability issues. A further 26% said insurers could best demonstrate their value to super funds by educating members about the claims process.
“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.”
Have TPD Claims steadily increased in most recent times due to Legal Firms touting for business to members of the Industry Super Funds? There should be no “settling out of court” and Group Insurers should set up a fighting fund to provide a sustainable, ongoing challenge to “No win, no fee” settlements of dubious claims. Some legal firms have annual budgets based on revenue from TPD Claims cases.
Are TPD claim figures available that dissect where a claim emanates from?
Thanks for you comment Ted. We will raise your question with our group insurance contacts but in our experience the data retained by insurers varies greatly. While we may be able to find an answer for one insurer, we are unlikely to be able to benchmark that against the wider industry. But we will certainly look into it.
Ted, this a multi-faceted issue that needs to be tackled on a number of fronts. Yes, increased lawyer involvement has contributed to a rise in claims but at the same time Trustees have been trying to build awareness of insurance benefits and achieve better coverage for their members. Government regulations too has seen more people – many of whom had existing health conditions, getting cover through their superannuation fund. Insurers have also been complicit through relaxed eligibility criteria and other relaxations in definitions. There are many reasons why there are more claims, we can’t just blame the plaintiff lawyers.
Your proposal to set up a fighting fund would, I believe, backfire very quickly. It would simply perpetuate the negative stereotype of ‘big bad insurers’ doing everything they possibly can to deny members their legitimate benefit. There is already enough of an adversarial mindset, we don’t need to add to it.
Personally, I think that if we want to prevent the lawyers from taking a significant slice of someone’s TPD claim, we need to get the message out there that it is not necessary to get legal advice with many claims. Trustees, Unions or Fund Administrators need to set up a service to better advocate on behalf of the member and guide them through what seems to most claimants to be a confusing and difficult process.
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