Group life insurance for super funds has become a partnership rather than buying an off-the-shelf product.

“Five years ago group life insurance was a commodity,” AIA Australia’s Chief Marketing Officer Damien Mu told an Australian Institute of Superannuation Trustees conference on insurance in Melbourne last week.

“Now insurers are delivering a different service model that is becoming more transparent.”

Mr Mu says insurers are now better at understanding the drivers of life insurance in a particular fund and what objectives it wants for its members.

“[Life] insurers have to support the product offerings by being more flexible,” he said.

“As a result group insurers are seeing the model evolve.”

AustralianSuper Insurance Product Manager Greg Staunton says his fund is always looking for new ways to handle the relationship with its life insurers as well as assessing their capability to work with large super funds.

“We are looking at ways to control the claims process as we have set claims objectives,” he said. “As we change insurers, we are always looking at their ability to handle the volumes of claims better.”

Vision Super GM Business Operations Peter Rowe says building a relationship with a group insurer is a gradual process, as the fund has been self-insured for 40 years.

“In 2007 we decided to offer income protection for our members and after a lot of debate, the trustees choose to outsource,” he said. “Then a couple of years ago we outsourced the insurance for the accumulation fund members, but we wanted to maintain that relationship with them.

“The result was claims are made through us and we then pass them onto the insurer.”

Mr Rowe says the decision to outsource was based on managing the risk and having the flexibility with product offerings.

Mr Mu says because the larger funds often want to maintain some degree of control over aspects of the life insurance provided, insurers will need to be more collaborative with trustees.

“Insurers need to mature as an industry and we need to work in a closer relationship with the funds,” he said.

“Funds need the infrastructure to support their member’s insurance and this is where insurers can provide the solutions.”

Mr Rowe says the first time his fund outsourced life insurance, the relationship developed and continues to build with the insurer.

Mr Staunton says his fund built a structure to deal with claims, but at the end of the day it is the insurer who makes the decision on claims, although the fund can make recommendations. 

“We think the participation [between fund and insurer] is right as we have put a plan in place,” he said.

Mr Rowe says as funds become larger and have more expertise in handling processes such as claims management, they will try and bring more life insurance operations in-house.

He also sees funds working together to improve their buying power for services such as life insurance, rather than merging.

Mr Mu says he is seeing funds doing this to create a larger pool of risks and create opportunities for technology solutions for handling insurance in a fund.

“Insurers don’t fear change, it is about what the [super] industry wants from insurance,” he said.