ASIC today released independent research on the experiences of superannuation fund members who directly engaged with their fund about insurance held through superannuation.
Report 673 Consumer engagement in insurance in super (REP 673) presents findings from research exploring the experiences of superannuation fund members, who were not using a financial adviser and directly contacted their fund to make enquiries about or make changes to their insurance arrangements.
There are over 20 million superannuation accounts and around half of these have life insurance attached. While some members have life insurance recommended by a financial adviser or arranged by their employer, most hold the default cover offered by their fund trustee.
Insurance in superannuation is complex and it is widely acknowledged that members’ awareness and understanding of it is relatively low. Our consumer research has highlighted that a number of 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 research found that the process of gaining information about insurance arrangements from their super fund or making changes to the insurance presented several potential hurdles to many members. 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.
A number of participants in the research engaged with their insurance for fact-finding or to address lack of knowledge about the level of cover they had and how much they should have. Most members expected this to be a simple self-service process, but found that was not the case. Many wanted more than factual information.
After interacting with their fund, about a third of the participants spontaneously reported that they felt confused, overwhelmed or uncertain. They found insurance complex and difficult. Some discovered information they did not understand or did not know how to respond to. This often caused them to delay in engaging further with their fund on insurance after their initial interaction.
The research highlights some challenges for trustees, such as those associated with providing more tailored information for members. At the same time, there is an opportunity for trustees to 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.
Superannuation trustees are encouraged to consider the issues raised in this report and how they might improve the experience of their members when they seek to engage about insurance.
ASIC commissioned Susan Bell Research to undertake this qualitative consumer research. It involved fifty in-depth interviews with superannuation 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 checked/compared the insurance cover before switching or consolidating funds.
The research looked at members’ motivations and experiences when making enquiries about their insurance arrangements, the resulting outcomes and the factors impacting those outcomes.
ASIC has been working on a number of initiatives designed to improve trustee practices around insurance in superannuation. ASIC will communicate further about its work, examining default settings on occupational categories and analysing the value for money delivered to members. ASIC continues to engage with industry on implementation of the Insurance in Superannuation Voluntary Code of Practice.