The regulator’s ‘Report 673: Consumer engagement in insurance in super’ found that “several fund members who directly engage with their insurance found the process challenging and weren’t always able to achieve what they set out to do”.
The report was based on 50 in-depth interviews with fund members who, in the last year, had reviewed the level of their insurance cover, changed the level or type of insurance cover, cancelled their insurance, changed their occupational classification within their insurance cover or compared their insurance cover before switching or consolidating funds.
The research found that the process of gaining information about insurance arrangements through super or making changes to the insurance “presented several potential hurdles to many members”, ASIC said.
“Limited knowledge and understanding of insurance in superannuation and a relative lack of confidence among members because of the complexity of web-based information were some of the issues identified”, the regulator stated.
While most members had expected the process of engaging with their insurance to obtain basic information like how much additional cover they needed to be “a simple self-service process”, most found this was not the case, ASIC said.
“After interacting with their fund, about a third of the participants spontaneously reported that they felt confused, overwhelmed or uncertain,” the regulator stated.
The report has recommended fund trustees “significantly improve their members’ experience by improving communication to members about insurance, including on their websites”.
“Many of the problems members experienced may have been reduced or avoided if the information they sought was easy to find, clear and balanced,” ASIC said.
Has anyone read Report 639 which highlights the bad advice given by Industry Funds, and how these behaviours are being ignored by ASIC. One rule for Industry Funds and another for Advisers
Perhaps member need advice from a real adviser? Good luck, insurance advice is so pre LIF reforms…
Really? Not a surprise. Additionally I guarantee that even if they found the experience was ok, they would be extremely upset when they went to claim. I say this because I’ll generally spend about 30 mins talking to clients about their specific insurance needs just around what the particular policies actually cover them for. Many super fund policies are stripped back (especially any group policies) from what most clients actually expect to be able to claim for given the cost.
To give solid insurance information, you need an experienced risk adviser. Without this, people are not getting the cover they think they are paying for.
Oh, but there aren’t many experienced risk advisers left, because they destroyed their remuneration model. No one is going to work for free.
In my experience about 90% of all industry super insurance policies I see are for the wrong amount of cover, miss important cover, or have the wrong conditions, for example reducing cover as people age etc. for that particular person. ASIC interviewed 50 people, including those who only needed to quickly look up something on the industry fund’s website.
This is not indicative of the overall situation as these were much more motivated people than normal. The overall situation is much worse.
This is unsurprising. I dealt with a large Australian (Industry) Super fund – that shall remain nameless – on behalf of a client for a pro-bono claim we were handling. The amount of twisting and turning they did to try to avoid paying an IP claim was beyond belief. Even when it was shown during mediation (with the now-discontinued Superannuation Complaints Tribunal) that their company policies had put this super fund member in a worse position – a breach of their duty as a trustee – they were still cleared of any wrongdoing and the client received nil. I would have thought some negotiation would have been on the cards, but in this case the SCT cleared this particular super fund and the only option for our client would have been to take them to the supreme court. She didn’t have the funds to do this so it ended up being left as it was.
Clients generally don’t even know how much cover they have in their super fund, let alone some of the key differences between high quality underwritten retail cover vs typical default industry fund cover (e.g. TPD ‘restricted any occupation’ definition vs regular ‘any occupation’ definition etc.)
The only way to make this better is to reduce, not increase red tape and make advice more accessible for all. The current onslaught of continual regulatory mess is not helping.
Since most of the lower premium clients who approach me for insurance are now being given a “1800 no one cares” phone number for their super fund with a message that I can’t assist them due to my need to run a profitable business I’m sure that the 1 in 3 is simply due to sampling and I’m doing the right thing by the client because that is what all the FP changes in the past 10 years were focused on achieving.
Who would have thought that a situation where you have a reasonably uninformed consumer dealing with someone on a call centre reading off a scrip would end in confusion? That would be the same people who made it unprofitable to give financial advice in Australia and don’t see anything wrong with paying a US accounting firm over $100k for tax advice in relation to a new employee.
Such a shock. Perhaps the regulator should put aside their false sense of understanding and knowledge of the industry and markets within, and accept that they have little practical knowledge compared to others….and ENGAGE with the market’s professionals when making rules or formulating guidance. Drop the ego ASIC and wake up.
That’s yet another logical outcome of imposing ridiculous levels of Opt-In compliance red tape on advisers, who are now being forced to offload these small clients due to this red tape – leading to total confusion by policy holders, as expected. Of course, the consumer lobby never discuss the need for service – just costs.
Im 100% sure that this was ASIC’s aim at all along. Why else would they have campained and made rules and regulations deliberately aimes at removing access to Financial Advisers for 99% of the population. Massive bonuses and Rolex watches for all ASIC staff now as they have achieved their mandate of destroying the financial future of the majority of Australians whilst enriching the banks, international hedge funds and insurers.
I wonder how they will justify removing insurance commissions entirely next year. I assume it will be something along these lines
“maybe its time to give the law firms like Slater and Gordon and Maurice Blackburn a bit more money. If we remove commissions there wont be any advisers helping clients, so less claims will be paid which will benefit internationally owned insurance companies and of all the claims which are paid almost 100% of them will need lawyers to get it paid and then those lawyers can syphon half of all the claim payments. These measures will ensure that our senoiur staff memebrs will be assured a stop on the boards of these companies when they leave ASIC and the the general public will definately be worse off. And if we ever get caught we can just blame the greedy financial advisrs for refusing to work for free”
Wake up all, that is why you need advisors, not robots and more and mopre online crap and garbage.
Yes, we need more RoboProduct, with the promoters remunerated via the intrafund “advice” racket.
Patrick, ASIC does not care. Clearly.
This is exactly why we have dedicated Financial Advisers in this country who take the time and care to educate clients about the what, why and how of this complex area….albeit….since LIF, risk advice became only marginally viable for even home office based practitioners so many no longer offer this advice. It seems the regulators are now starting to reap what they sowed.
One third felt confused, and probably 100% setup the wrong cover, had incorrect sums insured, cancelled their existing cover, will be impacted by exclusions, pay more than they should, or went into a poor product.
It is disappointing to hear about the research results – super fund members “confused and overwhelmed” of their insurance in super.
Speaking with many super fund trustees, I know how hard they work in communicating their insurance offer to their members.
It perhaps goes to highlight why so many members seek the (unnecesary) support of lawyers at claim time (hearing up to 60%).
As an industry we need to do better.
If the members had instead sought advice from an adviser rather than a PDS or website then perhaps the outcomes would have been better? It wouldn’t matter how simply you put information on a website the reality is that many Australians are financially illiterate and many more would struggle to read and digest a complex insurance article on a website.
This is where the benefits of dealing with an adviser who can distil complex information into the simple and provide advice rather than a multitude of options is advantageous.
Unfortunately the regulator and other anti-commission ideologues see no value in advice – underinsurance is climbing and no matter how many “A Current Affair” or “Australian Story” articles on the sobering impacts of underinsurance are screened things won’t improve.
No detailed advice and you can expect this outcome. But Labor and the Industry Funds want it all in there