The increased pressure on premium pricing for insurance inside super has sparked a new wave of product innovation over the past 12 months, according to Rice Warner.
Following a prolonged period of increasing claim numbers and durations, the researcher said group insurers have begun looking at new ways to create sustainable products, rather than simply relying on raising premiums.
Over the past year, Rice Warner said it had observed key changes in terms and conditions in the group insurance market. These have included:
- Increased default cover coverage, either to personal members or high risk occupations, and enhancements to income protection. Rice Warner survey results suggest that the proportion of members in industry and public sector funds with default income protection cover has increased from 43% to 52% over the last year.
- Funds changing the default death and TPD cover scale to a ‘life stages’ shape, or increasing the default number of units but changing (reducing) the sum insured per unit.
- Tightening of definitions and eligibility criteria, such as introduction of pre-existing condition exclusions for additional cover and life-events cover, and TPD changes for permanent incapacity, addition of rehabilitation/retraining clauses and moving from definition of ‘unlikely to work’ to ‘unable ever to work’.
One recent example of this trend is a new TPD definition introduced by a super fund which appears to be intended to encourage the take-up of retraining and rehabilitation (see: New Super TPD Definition Questioned).
However, the researcher warned that prices were likely to continue to rise, as the group market continues to experience profitability issues. Over the 12 months to June 2014, data from the Australian Prudential Regulatory Authority revealed overall group insurance profit margins, after tax, were down -8.5%.
Rice Warner also pointed to the continued involvement of lawyers in claims as a challenge for insurers. The researcher has begun to undertake a survey with funds about this issue, and while the results to date are preliminary, none of the super funds surveyed said they believed the trend of lawyer involvement in claims was decreasing. Rice Warner said this raised the question of how much value lawyer intervention is ultimately bringing members, particularly when legal fees are brought into consideration.
How are any of these changes “innovation”. They are more of the same defensive, restrictive and negative thinking so predominant in the industry. “Innovation” needs to address the major elements currently determining take up of insurance and claims. They include:
1. Community “entitlement” driving claims
2. Psychosocial aspects of claims
3. The rise of mental health claims
4. Claimant advocacy on the part of doctors
5. Stopping the increase in restrictions and definitions which are driving policies towards meaninglessness
Addressing these elements would be real “innovation”
John Harrison
Claims Consultant
Comments are closed.