Service delivery has become the focus for the big insurers servicing the Australian superannuation industry and, as Damon Taylor writes, product support and claims handling have become important differentiators.
Consolidation of mandates and services delivery emerged as the key focus for most insurers through 2010.
With the challenges of the global financial crisis behind them and with an acknowledged underinsurance gap as a backdrop, insurance providers have had the opportunity to consolidate their services as a key differentiator for those funds seeking a competitive advantage.
According to the chief executive officer of MetLife Insurance Australia Marc Lieberman, most insurers have grasped that opportunity firmly.
"From a MetLife perspective, I think our focus for the last 12 months has been really reinforcing our technology and service capabilities," he said.
"I’m a firm believer that service is going to be a differentiator into the future and firms like ours need to do everything we can to provide top-notch service and technology so that super funds have the ability to provide better information, easier processing, easier access for their members and an overall better experience.
"So that’s been a big focus for us."
"As far as the super industry itself goes, I think there’s been some of that but I think there’s also been a lot of focus on the potential consolidation and deals that have been in the press over the last six to 12 months and that’s probably been a bit of a distraction," Lieberman continued.
"We’re not involved in any of that so it has actually been quite good for us because it gives us clear focus and the ability to really concentrate on what we need to, which is making sure our technology and service offering is as solid as it can be."
Acknowledging that the insurance being provided by super funds had become an important differentiator, head of group life for Tower Australia Andrew Boldeman identified three areas of focus.
"At the moment, we’re seeing a very heavy focus on insurance and a faster pace of activity as funds increasingly look to use insurance to differentiate themselves from each other," he said.
"I’d really call out three main areas of focus, one being the products side so updating more frequently and a faster pace of change."
"Communications is another one. We’re seeing a lot of funds [that] have grappled with how to make insurance as easy as possible to understand for their members, so easier to understand communications, making the nature of the benefits that members have easier to understand and also making it easier for members to execute on changes," Boldeman continued.
"Then third on the list is service because it’s attracting a lot of attention from a fund perspective."
"So that means looking to deliver that member service experience and improving that service and really considering what’s the best way of doing things, what are the right avenues and really looking at broader ranges of communication and greater use of technology," Boldeman added.
In general, Lieberman said that it was clear that super funds were taking a long hard look at the insurance offerings being provided to their members.
"They’re re-evaluating them in terms of whether they’re appropriate and whether they’re providing the right levels of service," he said.
"I think there’s a general understanding and acceptance that Australians are underinsured, that doesn’t seem to be debated by anyone, and that where insurance is held by most Australians is through their super fund."
"Super funds are taking an increased level of responsibility in ensuring that they’re providing enough and making sure that it’s at a sufficient level, knowing that it may be the only insurance that a member has," Lieberman added.
"And that’s certainly a positive."
"Underinsurance is a big problem and anything these industries, both the insurance industry and the super industry, can do to help rectify that is to the benefit of everyone."
Undoubtedly service is top-of-mind for both insurers and super fund trustees. Yet the constant battle within the insurance space is balancing what insurers refer to as ‘the whole insurance package’ against an unavoidable bottom line in price per unit of cover — and according to Lieberman, it is one insurers had to be aware of.
"Obviously funds are always going to have to decide how much they can afford to pay per member for insurance coverage and then they’ve got to decide how they’re going to split that up amongst various benefits," Lieberman said.
"Ultimately it really does come down to dollars per unit cover."
"However, I will also say that what I’ve seen in the past six months being in Australia is a bit of price compression which is to the benefit of the super funds," added Lieberman.
"So I think they’re getting more coverage for a lower price than they were two or three years ago and that translates directly to the benefit of the member."
Altering the perspective slightly, general manager of wholesale life at CommInsure Claire Roberts said that the key driver for premium levels was member affordability.
"The primary purpose for super is to provide for the member at retirement," she said.
"So the proportion of a member’s account balance that can be diverted to fund efficient and low-cost life insurance is a matter that the funds trustees take very seriously."
"In addition to this is the competitive nature of the insurance industry that has, in recent years, resulted in downward pressure for insurance premiums," continued Roberts.
"Most forms of insurance follow a cyclical pricing pattern and we expect this downward pressure to moderate to a realistic and sustainable level."
Roberts said that product design was also a key driver of premium with funds focused on ensuring that their members had appropriate cover and that it was easy to access with no or minimal underwriting.
"And that has resulted in a general move toward higher automatic acceptance levels [AALs], more suitable levels of cover for younger and older members and life event triggers that provide access to increased cover for members when they need it."
"So the likely future trend is toward simpler, easier-to-understand product designs."
Lieberman said that when it came to cost and value for money, though they would always be key factors in the provision of superannuation-based insurance, trustees were looking for much more than a low price point.
"I can only speak for our customers but I know that we work very closely with them to try to keep service levels high, costs low and we try to find ways to enhance the experience," he said.
"So shorter turnaround times for underwriting, shorter turnaround times for claims management, reduced prices overall — things like that."
"And I’d guess our competitors are doing the same thing; I would certainly hope they are," Lieberman continued.
"There is a general sharper pencil out there on both sides trying to make sure things are better than they have been and that’s kind of a philosophy that we have.
"I’ve had that conversation with several of our clients and they say: ‘Well, what’s different now as compared to three years ago?’"
"And my response is that I hope what they’re receiving now from MetLife is better than what they were receiving three years ago both from a service and a price standpoint."
Not surprisingly, Lieberman said that he also hoped that two and three years into the future, the benefits, price and service being received by MetLife clients would again be better than what they were receiving today.
"And that’s simply because our philosophy is one of continuous improvement," he said.
"We can’t afford to plateau because we’ve got to constantly get better and if we’re not, I expect our clients to give us a wake-up call and say ‘listen, what have you done for me lately?’"
Similarly, Boldeman said that while the price of insurance cover would always attract a lot of attention, the interactions between a fund and its insurer had become just as important.
"Price or the benefit terms or even the specific product terms that are provided are always going to be one aspect; that’s what always attracts a lot of attention as funds consider their insurance," he said.
"But I think that of as much importance, if not of even more importance, is funds considering how they interact with their insurer, how they’re going to interact with each other on an ongoing basis, how they share ideas, the effectiveness of the two parties actually working together to deliver quality solutions to their members."
"Many funds have increasingly found that while price is important, they also need to work with these people and so the relationship needs to allow communication and get solutions," Boldeman continued.
"And to me, that’s very much what people are talking about when they talk about that ‘whole insurance package’."
Asked how conscious funds were that insurance was about much more than price, Boldeman said that the evidence certainly suggested as much.
"That’s definitely what I’m seeing," he said. "Increasingly this is the major decision in placement, those other services that go well beyond price per unit of cover."
"It’s easy to compare price and that’s always going to be a very major driver behind funds’ decisions but I’m definitely seeing this increased focus on the other parts of the proposition," Boldeman continued.
"But for some time now, the industry has been on a path of improvement in terms of the way all insurers are interacting with their funds.
"They’re doing so with a greater degree of flexibility and a greater degree of personal service."
Aside from price and service however, recent years have also seen the use of insurance-based technology increase exponentially.
From data analytics to online calculators to claims management, the role of technology is vital and, according to Lieberman, one that can be a differentiator in and of itself.
"On the group side, we’ve done a tremendous amount of work over the last 18 months in developing e-technology, e-application, e-lodgement, and e-claims is being rolled out as I speak," he said.
"We recognised quite a while ago that enabling members and the super fund administrators to access our systems online, be able to provide information and query online was going to be critical."
"We consider it table stakes really, we don’t even consider it an enhancement," continued Lieberman.
"It may be that we’re one of the few offering it right now in an active and live way for our clients but I would expect everyone should be down the road and we’ll continue to work to enhance and make it as easy as possible."
"Again, that has been a huge area of focus but what I hope is that it allows members to have better access, understand what they have better and therefore be able to make more informed decisions."
Roberts said that compared to other sectors, the life insurance industry had been relatively slow to embrace technology.
"That has begun to change and for wholesale insurance in particular, increased competition in the superannuation industry has highlighted a range of opportunities," she said.
"Superannuation funds, most notably industry funds, have endeavoured to deliver greater services and improved customer experience to their members and insurers have responded with a range of technology innovations."
Citing a number of technological developments that had occurred within the insurance industry, Roberts said that the first and most prominent had been enabling fund members to apply for additional insurance online.
"That’s also coincided with improvements to product design such as higher AALs for cover without the need for underwriting," she said.
"Though coupled with relatively low levels of online member activity, member take-up for this capability appears to be low."
"Claims notification and tracking is another key area of opportunity," continued Roberts.
"CommInsure were first to market enabling administrators to upload claims information through an online portal and to track claims status to reduce cycle times and make it easier for administrators.
"CommInsure is also proud to announce another market first for wholesale insurance with SMS status updates direct to the claimant for income protection claims."
Reflecting on the fact that technology within superannuation-based insurance was primarily about informing and enabling members, Lieberman said that it was gratifying to have seen relatively significant progress.
"One of the toughest things about this business is that very often the only time a member will even look at what their benefits are is if they have a situation happen where they need to lodge a claim," he said.
"And that’s really not the right time to examine what your benefits are.
"So the more we can do to make the information easier to access, easier to understand and more readily available to the member is only going to better the situation."
Of course the one inescapable issue when discussing insurance and its provision within the super industry is underinsurance.
But as an issue identified some years ago and one that insurers are acutely aware of, Boldeman said that both the insurance and super industries had made significant strides.
"I think progress has definitely been made and in terms of action, I see it being made in two ways," he said. "One is by making it easier for members to exercise choice and understand choices to increase cover on a voluntary basis; and also from a default perspective, by making sure that the default levels of cover for those who are relying on their trustees and not making an actual choice, on making sure that those default levels are appropriate."
"I’d say on both counts we’ve seen significant progress over the last few years," continued Boldeman.
"We’ve seen a number of high profile funds actually increase default levels of cover, they’ve thought through the affordability of that cover by researching members and understanding that members are actually happy paying for a higher degree of insurance cover and they’ve responded to that. That is genuine progress."
Espousing a very different view, Lieberman said that when all was said and done, progress in terms of bridging an acknowledged underinsurance gap had been minimal.
"I don’t think we’ve come far at all, quite frankly," he said.
"I don’t think we’re doing enough as an industry and I don’t think the Government’s doing enough in terms of educating people and I think that’s really the only way you can attack it.
"You’ve got to get people to understand the purpose of insurance, why it’s being offered, why they need it," continued Lieberman.
"It’s not a lottery ticket, it’s an income protection vehicle should the income of a loved one or a partner be diminished or made to go away completely in the case of death.
"So it’s really through education — and other than isolated incidents, I don’t think we as an industry or as a country have done very well at it."
Yet the reality, according to Lieberman, is that Australia is not unique in that respect.
"That’s the problem and I think that’s where, if the industry can work with the Government most effectively, it should be around education," he said.
"The focus has to be really getting people to understand what insurance is for, why they have it and why they should pay attention to how much they have and how much they need. There’s no other way."
Asked whether there was any yardstick that the super and insurance industries could use to gauge their progress in bridging Australia’s underinsurance gap, Boldeman said that the unfortunate reality was that doing so would always prove difficult.
"It’s a good question and there’s no one right answer unfortunately," he said.
"The reality of all of this is that none of us wants to be in the situation where we need to call on the money and in a situation where you’re leaving dependants behind or you’re disabled.
"Obviously, it’s always better to have more money rather than less but I think the constraint in many cases is actually just affordability," continued Boldeman.
"Funds have to manage to that broader insurance need but also ensure that insurance premiums aren’t a drain on their members’ long-term retirement benefits either.
"They’re probably the key points to consider in terms of when enough’s enough but, at this stage, just looking at average salary and an event in which someone at age 30 is disabled and can’t work for another 35 years, the majority of Australians would really be in a significantly less favourable position than they might imagine."
So with underinsurance and an increasingly competitive superannuation industry framing all activity for group insurers, what then are insurers’ focuses?
For Tower, Boldeman said that the road ahead would be about enhancement.
"For us specifically, we’ll be continuing to build our capabilities to support our clients," he said. "So enhancing our support team, enhancing our products and differentiating service.
"We’ll be continuing to invest heavily in technology, so not as much bring new technology solutions to bear but just enhancing current ones and making it easier for members to execute and interact and engage with our funds."
On the MetLife side of the fence, Lieberman said that the focus was expansion.
"We’re looking at expanding our business," he said.
"To be completely honest, when I came to Australia it was with the intent of turning MetLife into one of the top group insurance providers to superannuation in Australia in the next few years.
"I think that when you look at MetLife’s strength as a global brand, and our pending acquisition of Alico (which will close in a couple of weeks), we’re already the largest insurance company in America and we’re soon to be one of the largest in the world," Lieberman continued.
"We need to let Australian super funds know that we’re here and that we’re here to stay and that we do have that strength and expertise behind us.
"We’re firm believers in the value of insurance, and when you see that people don’t have the coverage that they need and you know the difficulties that can cause should a tragedy happen, it almost becomes a mission to figure out a way to rectify it."
