Purposeful product design delivering better member outcomes

Almost 10 million Australians have at least one type of insurance (Death Cover, Total and Permanent Disability [TPD] or Income Protection [IP]) provided through superannuation¹. 

Many of these superannuation fund members also benefited from having insurance in place when they faced challenges with their health, with almost 50,000 new claims being admitted in 2021, totalling $6.6 billion in claims paid.

For those who have cover in place, and haven’t needed to make a claim, the peace of mind that they – or their loved ones – will be protected with a financial safety net, if they’re ever unable to work due to illness, injury or death has inestimable value.

Supporting members through more sustainable product design

As in any industry, in order to continue providing a valuable product offering, we need to constantly consider how effective current product design is. In life insurance, this means considering fairness in providing cover and assessing claims, reflecting upon the fund membership profile and how much cover will cost members, and the impacts of premium instability.

But why now? Understandably, societal needs were a little different when insurance products were first designed. The view of what constitutes permanent disablement or temporary disablement was based on the health advice at the time. However, advances in medicine, technology and our knowledge of rehabilitation and recovery support have evolved immensely. Societal needs and community expectations have also evolved. The pandemic across the world accelerated diagnosis rates as well as raised awareness of the complexity and prevalence of mental health conditions, and how as an industry, we can support members return to health and work post-claim. 

So to align the intent of our products with the realities of today’s members, we need to consider:

• How our disability products, and specifically TPD, were designed to support people with physical disabilities rather than mental health conditions. With increasing disability claims for mental health conditions, we need to find a solution that balances member needs and value. 
• How we can support members to find the right balance between what they need, and what they can afford, by considering the role and levels of default cover and pathway to accessing voluntary cover.
• Better alignment of lump sum benefits or income stream payments for temporary and permanent incapacity with members’ needs.

The time is now to act on sustainable product design

The trends we’re seeing now mean we need to start acting sooner rather than later.  TAL’s 2021-22 claims paid data show that mental health conditions have now risen to 23%², to be the leading claim reason through super for living benefits. And as we begin to start seeing the impacts of the pandemic, we can only expect this number to increase across the industry.

TAL believes there is significant opportunity for insurers to work with trustees to not only design appropriate, sustainable and affordable insurance but to also ensure that: 

• a member understands their cover in order to make informed decisions about whether the type and level of cover is right for them, 
• a member’s insurance cover supports them to return to health and work when they are temporarily incapacitated
• a member or their family are supported by a lump sum when they are medically retired or pass away and 
• a member’s claimed condition is not adversely affected at the time of claim.

There has been a shift in the language in the industry to talk about both member experience as well as member outcomes. This is a great opportunity for us to highlight the impact of product design to improve their experience, with a focus on simplification, from underwriting to claims. 
To evaluate whether products support improvements to both member experience and outcomes improve member experience, some specific questions to consider are:

TPD

• Does making members ‘prove’ total and permanent disablement at claim time compromise any possibilities of recovery?  Is the need to ‘prove’ total and permanent disablement lessened when a member has the support of income protection cover?
• Can we improve current TPD  definitions for members so that they are simpler and more understandable? 
• Whether TPD cover is appropriate for members who claim for mental illness or is income protection cover better suited to help members rehabilitate and return to work?

IP

• How can long-term income protection benefits better assist members temporarily incapacitated to return to work?  With research confirming that “an early return to work helps recovery, prevents de-conditioning and helps provide people with appropriate social contacts and support mechanisms,” ³ we need to ensure there are appropriate rehabilitation and recovery support services available and accessible to members.
• How easy is it for members to seek professional financial advice and vary their cover according to their needs? 

We’re supportive of the  momentum for change

Exploring a more sustainable product design has been on the agenda for insurers and trustees alike. With factors outside our industry now accelerating the need, these questions can help act as springboards to facilitate further insurance design discussions. Our product team has  already started this journey, having drafted simple product terms that we are keen to share and work with you on to determine their suitability for your membership.  
If you would like to explore where the above questions may lead and whether the simplified product terms are appropriate to your membership, please contact your Client Manager to arrange further discussions.

Sources
1 The Future of Insurance in Superannuation report prepared by Deloitte Access Economics for ASFA

2 Claims statistic based on total number of accepted claims for insurance through super that were decided between 1 April 2021 and 31 March 2022. FUTURE OF INSURANCE IN SUPERANNUATION REPORT PREPARED BY DELOITTE ACCESS ECONOMICS

3 Health Benefits of Good Work:  https://www.racp.edu.au/advocacy/division-faculty-and-chapter-priorities/faculty-of-occupational-environmental-medicine/health-benefits-of-good-work