Trustees need to be more sophisticated on group insurance

Superannuation fund trustees need to adopt a more sophisticated approach to insurance within superannuation including “needs-based” approaches whereby members’ needs are defined based on a combination of age and life stage, accord to MLC Life.

MLC Life has used is submission to the Productivity Commission (PC) inquiry into superannuation competitiveness and efficiency to argue that trustees need to improve their understanding of their memberships and the profiles of their members.

“Some funds are now introducing occupational ratings to ensure competitive pricing by occupation,” it said. “Generally, however, incoming members are defaulted to the most expensive occupational rating and they need to apply to the fund to change their occupational status so as to obtain improved premiums.”

The MLC Life submission said that, in addition, some funds had reduced or capped the premium burden on younger members by reducing death and total and permanent disability benefits.

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“A more sophisticated approach is to move to a more ‘needs based’ design, whereby member’s needs are defined based upon a combination of age and life stage,” the submission said.

The MLC Life submission used a case study to example how the insurance and a partner superannuation fund had utilised the ‘life stage’ approach which it said allowed it and the super fund to design an approach that automatically varied the level of default cover and associated premiums to provide financial protection in the years it was most needed.