The future of insurance in superannuation

At this year’s ASFA conference in Sydney on 20 November, TAL hosted a panel session of industry experts who shared their perspectives into the demographic trends, consumer perceptions and political drivers that are likely to shape insurance in super in the years ahead. 

The session was chaired by Jenny Oliver, TAL’s Chief Executive, Group Life & Retirement, who was joined on the panel by: 

• Ashley Fell, Director of Advisory at McCrindle Research
• Simon Banks, Managing Director of government relations firm Hawker Britton
• Christine Aventi, Chief Strategy Officer at creative agency BMF.

Jenny began the session by reinforcing the value default insurance in super provides as essential protection to millions of Australians – including those who are most vulnerable. Members are also supported by the high proportion of claims admitted through default insurance in super, and the efficiency of the system itself, with its high claim payout rates for every dollar paid in premiums.¹

However, recent political commentary has challenged the role of insurance in super, highlighting the need for funds and insurers to work together so we can ensure it continues to offer members value, security and peace of mind into the future.

Understanding the needs of younger members

During the session, Ashley presented on the generational dynamics that will play a part in shaping the superannuation landscape in the coming decades. Millennials and Generation Z are now becoming the primary workforce cohorts – and while they prioritise financial independence, many are anxious about their long-term financial stability. This reinforces the importance of providing – and raising awareness of – financial products and services that will support their goals and alleviate their concerns. 

Home ownership continues to be the top financial priority for Gen Z, but cost-of-living pressures make this a challenge – not only for younger members, but for their parents who may have to support them for longer, which can impact their own retirement savings. What’s more, Australians are not only living longer but also working longer, with living costs and rising debt levels contributing to the trend of increased workforce participation among over 65s. 

Insurance in super will therefore play an even more vital role in protecting the retirement savings of members whose finances might otherwise be derailed due to illness, injury or the death of a loved one. 

Navigating the political landscape 

There are currently several political factors in play that could influence the future of insurance in super, such as the Superannuation (Objective) Bill, the Senate Inquiry into the retirement system, and the advice reform debate. Political discussions around insurance in super tend to be cyclical, but the recent media and regulatory scrutiny highlight the need for the industry to continue to be focused on delivering against ever-rising expectations around service and member outcomes. 

During the session, Simon noted that Millennials are now outranking Baby Boomers in terms of voter numbers. Political parties will no doubt be considering this shift as part of their voter value propositions, especially since younger voters tend to favour socially equitable safety nets like Medicare. 

Default insurance through super serves a similar purpose by providing automatic cover, without the need for underwriting, to many workers who might not otherwise be eligible for other forms of life insurance. But because public recognition and understanding of insurance in super is generally low, it’s important to think deeply about how we can best help members recognise its value. 

Shaping consumer perceptions 

To help members value their insurance in super, Christina emphasised the importance of considering how consumers perceive value – and how these perceptions can influence their engagement with product and service providers. 

One of the key challenges is the intangible nature of insurance, which can make it difficult for consumers to appreciate its value until they need to make a claim. And while there are perception challenges around ‘death cover’, there is an opportunity to give more prominence to the value and benefits of ‘living benefits’ offered through TPD and income protection cover.

A focus on demystifying life insurance products and helping members build their financial literacy can go a long way towards fostering member trust and engagement. Meanwhile, the increasing prevalence of social media – particularly in the lives of younger members – presents an opportunity for financial services providers to leverage digital channels and engage members in ways that align with their consumer habits, while providing tailored, accessible information to support their decision-making. 

TAL is proud to be leading this important conversation, and we’re grateful for the insights of our panellists into how we can better understand and meet the future needs of members. The ASFA session also provided valuable food for thought on how the industry can collaborate to ensure that insurance in super continues to be a vital safety net that supports members through life’s uncertainties and helps more Australians secure their financial future.

1. Deloitte Access Economics/ASFA, The future of insurance through superannuation, 2022.