Faced with the implementation of the Government’s Protecting Your Super (PYS) legislation and the impending passage of the allied Putting Members Interests First legislation the member communications capacity of superannuation funds has never been more severely tested.
Over the past six months, the superannuation industry has been witness to the extensive cooperation of group life/risk insurers and their superannuation fund clients as they have attempted to ensure that members become aware of what is at stake from the Government’s legislation – the loss of their life insurance.
The legislation is aimed at making insurance inside superannuation opt-in for those aged under 25 or with low balances (less than $6,000) or where accounts have been inactive for a period of 18 months.
Each of the life insurers have played a critical role in seeking to help superannuation fund clients contact their members and while the results have been variable, the bottom line appears to be that many members have been persuaded to actively vote to continue their insurance coverage.
A measure of the success of these campaigns was revealed in a submission filed with the Senate Economics Legislation Committee review of the Putting Members’ Interests First (PMIF) legislation by AMP Limited.
AMP, like many other superannuation fund providers, expressed concern at the impact of the Government’s legislation and the pressure it had placed upon providers to communicate with their members within extremely tight timeframes.
“In an effort to ensure customers impacted by PYS, which took effect from 1 July, 2019, understood the changes and were able to make an informed decision about their insurance, AMP ran a comprehensive communication and engagement program using mail, email, SMS and phone,” the submission said. “This was supported by social media and the ‘When did you last check your super?’ industry campaign which used social, digital and broadcast media including radio and pay TV.”
“As a result, many customers have already received multiple notices in respect of changes to insurance in superannuation due to the PYS changes. Further notices regarding the additional changes to insurance in superannuation proposed in the PMIF Bill, particularly if they are so soon after the PYS changes as currently proposed in the PMIF Bill, are likely to result in confusion for customers. Due to the similar nature of the changes, there is a risk that customers may believe the PMIF communications to be referring to the PYS changes and dismiss these on a false assumption that they have already taken appropriate action.”
“For example, AMP has received elections to retain insurance from more than 5,000 superannuation customers with inactive accounts under the PYS rules, that also have a balance of less than $6,000. AMP has confirmed to these customers, as required by PYS laws, that their insurance will be maintained despite their account being inactive unless they choose to cancel their cover. To comply with the proposed changes in the PMIF Bill, AMP will be required to send these customers another notice that, despite the recent confirmation that their insurance would be maintained, it will now be cancelled on 1 October, 2019 unless they provide a new and separate election reconfirming that they want to keep their insurance,” the submission said.
“In addition, as noted above, AMP has received more than 440 customer requests for insurance to be reinstated after it was cancelled from 1 July, 2019 and to be maintained despite their account being inactive,” it said. “Customers who have their cover reinstated as requested, and have an account balance below $6,000, will have their cover cancelled again on 1 October, 2019 unless they provide a new and separate election reconfirming that they want to keep their insurance.”
The AMP submission went on to say that both of these customer scenarios related to the interaction between the recent PYS changes and further changes to customers’ insurance and superannuation proposed in the PMIF Bill and were examples of likely customer confusion and potentially leading to negative outcomes for impacted customers.
AMP’s submission went on to request a deferral of the PMIF commencement data to provide time for Australians to understand and accommodate the impact of the PYS changes and reduce the risk of confusion.
However, the Assistant Minister for Superannuation, Financial Services and Financial Services Technology, Senator Jane Hume used last month’s Financial Services Council (FSC) Leaders’ Summit in Sydney to make clear that the Government, while recognising the challenges faced by the industry, was not for changing.
What is more, Hume berated the superannuation industry for not having worked to develop an industry solution.
“I’ve had a lot of meetings with stakeholders in the superannuation sector since taking up the portfolio. And, of course, I’d taken a strong interest in the sector in the previous parliament,” she told the FSC conference. “But it’s only now – with the writing on the wall, where it looks like the numbers are there to pass this reform to eliminate unnecessary insurance – that I have a whole bunch of industry players acknowledging ‘oh yeah, we agree something has to be done about this’.”
“To which I say ‘well where were you?’,” Hume said. “If there’s one thing that adds fuel to the perception that the superannuation sector, for all its talk about putting members first, is in reality beset with complacency and inertia, it’s this.”
“Why isn’t the industry taking action itself on long-standing problems we all know are there, instead of waiting to be dragged kicking and screaming by Government towards a solution?”
All of which has led superannuation fund and group insurance executives to conclude that it is more likely than not that they will have to begin ramping up their member communications to deal with the issue.
And if that is the case, MLC Life Insurance chief of group and retail partners, Sean McCormack believes that much has been learned from the PYS implementation experience and that a holistic approach is what is likely to work.
MLC Life Insurance last month released research it commissioned to determine the implications of the PYC member communications exercise and the findings appear to back the analysis presented by AMP Limited to the Senate Economics Legislation Committee – a multi-faceted approach actually works.
The research found that life insurance within superannuation funds was not top of mind for members, with only a quarter of respondents saying they had life insurance and with that number rising to 44 per cent when they were prompted.
However, the research also showed that among the top 12 biggest super funds, between 36 and 61 per cent of respondents were sure their funds included life insurance.
Importantly, 55 per cent of all superannuation fund members surveyed said they saw value in having life insurance as part of their superannuation.
Commenting on the research, McCormack said that MLC Life had worked with a number of its superannuation fund clients and had found that the holistic approach to member communications worked best.
He said that when members had been contacted across multiple channels – multiple letters, e-mails, phone calls and digital – it saw an opt-in rate of over 40 per cent.
However, when members had only been contacted via a single channel, that opt-in rate had dropped significantly to around 10 per cent to 20 per cent.
These were the key research findings released by MLC:
AUSTRALIAN SUPERFUND MEMBERS WHO HEARD / DIDN’T HEAR ABOUT THE PYS REFORM
- Nearly half of all Australian super fund members (48 per cent) have heard of the reform;
- Less than one in three (30 per cent) Australians had the reform ‘top-of-mind’ or could easily recall hearing about it;
- Australians aware of PYS, 46 per cent said they primarily heard about the reform from mainstream media, while 35 per cent heard about it from their super fund via email, letter or phone;
- Communications and campaigns by the Australian Government, media commentators, the financial services industry and superfunds appear to have limited cut through. Two-thirds (64 per cent) of Australians revealed they haven’t heard about the PYS reform or can remember anything specific about it;
- Among superfund members with life insurance, four out of 10 Australians (44 per cent) haven’t heard of the PYS reform; and
- A majority (70 per cent) of superfund members who were unaware of PYS would have liked their superfund to have contacted them about the reform.
- Australian superfund members feelings and perceptions about the PYS reforms
- Overall 77 per cent Australian superfund members feel positive about the PYS reforms, saying it’s a good initiative, relevant for them or increases trust in the financial service sector; however, 83 per cent also feel concerned about the reform, believing e.g. it needs to be better communicated;
- 75 per cent of superfund members agree that the PYS reforms needs to be made more clear, including the actions people should take as a result of the reform;
- A majority (62 per cent) of superfund members believe the reform as a good initiative and 43 per cent believe the reforms have increased trust in the financial services industry; and
- Even among Australian super members with life insurance, 41 per cent said they feel the PYS reforms were mostly for the benefit of the industry.
AUSTRALIAN SUPERFUND MEMBERS – TOOK ACTION VS DIDN’T TAKE ACTION
- Among Australian superfund members, 41 per cent have taken some form of action including one third (30 per cent) of Australians contacted their superfunds about the reform, 35 per cent elected to keep their life cover and 16 per cent decided to cancel the insurance cover entirely; and
- Of superfund members who took action following the PYS reforms, 75 per cent said the reform change was relevant to them, 69 per cent said it was a good initiative, 46 per cent said the reforms have increased trust in financial services, but also 50 per cent said it is mostly for the benefit of the industry.
Didn’t take action
- More than four of 10 Australians (43 per cent) who were aware of PYS did not act but felt like they should take some action. However, they said some barriers exist, including they didn’t know if they should do anything (20 per cent) and it wasn’t clear what they had to do (14 per cent; and
- Of superfund members aware of PYS, 59 per cent of those who were aware of the reform decided to take no action.