An opportunity for the life insurance industry to take stock and look ahead to the next couple of years is coming up at ANZIIF’s annual Group Life Seminar on 14 September.
The flagship industry event usually takes place with in-person seminars in Sydney and Melbourne but was cancelled last year due to COVID-19.
With lockdowns currently in place in both New South Wales and Victoria, the 2021 event will be entirely virtual.
LIFE INSURANCE IN SUPER
Each seminar approaches life insurance from a different angle and this year’s panel, which includes representatives from the Australian Prudential Regulation Authority (APRA) and the Financial Services Council (FSC), will discuss life insurance in the context of superannuation.
‘The superannuation industry has witnessed a great deal of change in recent years, and much of it continues to be complex,’ says Matthew Brown, client director — Health and Benefits at Aon and the emcee of the Group Life Seminar.
‘We've got a really good cross section of key stakeholders including APRA, ASIC and the FSC, along with a super fund, who's actually participating in that broader environment and can reflect on recent and upcoming developments.’
SUSTAINABILITY OF PRICING
One of the key points of discussion at this year’s seminar will be sustainability; in particular, APRA’s push to make sure the pricing set within superannuation funds for life insurance is sustainable for the longer term
‘Pricing tends to go in cycles, and we're very much back in a cycle now where prices need to be reviewed with longer term sustainability in mind,’ says Brown, who has been with Aon for 14 years and has a background in employee benefits.
‘Past lessons have taught us that if the price is set too low for the benefits being offered, it generally isn’t sustainable in the longer term, which has ramifications for all stakeholders and ultimately the fund members through the insurance premiums deducted from their accounts.’
AVOIDING PREMIUM SPIKES
Ideally, the aim is to avoid premium spikes, particularly where the price is set too low and is then adjusted — perhaps quite dramatically — in favour of greater stability, consistency and affordability.
To this end, APRA has issued guidelines around the inputs required to properly price an insurance risk, including up-to-date, accurate and complete member and claims data. ‘Both current data and historical data is needed,’ explains Brown.
A key goal for insurers is to identify trends: understanding the pattern of change is just as important — if not more important — than understanding the current position.
Insurers also need sufficient time to undertake a proper analysis of the data, so that they understand what they're pricing and to ensure the premiums offered are fair and sustainable for all parties.
Another hot topic on the agenda for the panel is the blurring between retail insurance and group insurance being provided through a super fund.
‘Retail insurance is generally purchased as an individual, and that's often done through an advisor in Australia, explains Brown.
‘Group insurance is generally purchased on a group basis for a group of individuals; in this case, the super fund members.
'With some of the changes that have been put in place over the last couple of years — along with what's coming ahead — the lines are already starting to blur and that’s likely to continue.’
There are a number of drivers for this; in particular younger members and those with low account balances now having to ‘opt in’ to insurance under the Federal Government’s Protecting Your Super package introduced in 2019, rather than the previous ‘opt-out’ model.
LOSING LIFE INSURANCE COVER
The consequence of this legislation is that a significant cohort of people who would ordinarily have insurance through their super fund, may not have any — and may not realise this is the case until it is too late.
This raises issues for both fund members in situations where they may need to rely on the insurance cover and for insurers in assessing and appropriately pricing super funds and broader insurance portfolios.
In addition, the introduction of ‘stapling’ from November 2021, which will see members keep the same Super Fund as they move from job to job, is also expected to have an effect that industry players will need to monitor in the longer term.
ON TOP OF TRENDS
Brown says the seminar is a valuable opportunity for life insurance professionals to stay on top of the many recent and upcoming developments occurring in the industry and consider these changes from different perspectives.
‘The experts will come along to talk about the changes that have been put through and what they're seeing in the market and will share their suggestions for funds in terms of the best ways to handle the changing environment.
'Attendees will be able to participate in live polling and engage with the presenters particularly in the group panel session following the individual presentations.’