Stapling to create more diverse super memberships

Stapling will lead to superannuation fund membership becoming more diverse and less occupationally aligned and funds need to consider how it will impact insurance in super, according to TAL.

Speaking on an Australian Institute for Superannuation Trustees (AIST) panel, TAL head of product and pricing, Michael Lin, said funds would see different levels of growth and exits. The age profile of memberships would shift and all funds would likely see a membership that was less occupationally aligned.

The questions Lin said funds would have to answer were:

• How do our insurance product needs evolve to adapt to these changes?
• Do we need to make cover commencement and cover transfer processes simpler?
• Do we need a more granular premium structure to incorporate the changing occupational mix in our membership?
• Do we need to consider a different default benefit scale to accommodate a different membership?

“The answer I expect will need to be tailored for each fund with the support of insurer. Most of these impacts are longer term and it is important for funds insurer to stay ahead, understand the possible outcomes, monitor trends and be prepared to take actions whenever that's required,” Lin said.

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Lin said cross subsidy would need to be addressed as memberships become more diverse.

He said funds firstly needed to address where the cross subsidies were coming from and monitor where there are any emerging cross subsidies when membership changed.

“On the fairness of the premiums to individual members – if I'm a light blue worker versus a heavy blue worker, under the current arrangement you kind of can't really capture the specifics of occupations, and essentially we will be providing the same rates,” he said.

“There is a question about whether that is fair and what's the extent of that is cross subsidy? For an insurers perspective, there's also this other angle, which is about forecasting, what's the kind of going forward risk rate as your membership changes?”

Lin said better data would allow funds to better forecast the risk cost more accurately.

“The higher the confidence in terms of the estimation the less uncertainty will be built into the price,” he said.

“That’s definitely benefit of having better data and better clarity on what the future of risk cost is for a particular fund.”