Group insurers are finding themselves pressed for resources as they race to meet the Federal Government's July 2019 deadline to cull the default opt-ins for group insurance.
MetLife head of reinsurance and regulatory affairs James Carey said the scrutiny is touching all elements of the business including claims, underwriting, distribution and product and pricing.
Group insurers must also rework marketing, customer experience and digital as superannuation funds look towards them to support desired member outcomes.
And all of this needs to be done in a "very compressed time frame."
"There's no doubt that we are stretched," he said. "It also highlights to an extent a shortage of talent in the various elements of our industry as all of us are scrambling around trying to find those resources to do this work."
AIA chief group insurance officer Stephanie Phillips also said finding talent is difficult.
"Group is a niche environment. You have to find right people to do the right pricing, it is not always easy to find those people," she said.
Carey and Phillips spoke at a panel discussing group insurance at the FSC Summit last week. Other speakers included TAL's Brett Clark and APRA's Adrian Rees. The session was led by MLC Life Insurance's David Hackett.
In May's Federal Budget, the Government said by 1 July 2019, group life insurance will move from a default framework to an opt-in extra for those with balances less than $6000, accounts that haven't received a contribution in 13 months, and for members under 25. The aim was to protect retirement savings for Australians.
A KPMG report said the changes could reduce group insurance covers by half, and push up the average group life premiums by 26% if collected premiums dropped another 42%. This hike could wipe off 1.4% on an average from women's account balances.
The panel's speakers were in agreement that duplicate premiums must go. However, they were clear that opt-in insurance would increase premiums for the remaining members in their insurance pools, and might result in reduced benefits and products.
Operational risks
Speaking of TAL's workload to meet the July, 2019 changes, TAL chief executive Brett Clark said the TAL will have to re-price everything as the nature of the insurance pool will change so significantly.
"Not just repriced, redesigned, discussed, worked through with the superannuation funds then communicated very carefully and thoughtfully to the members, again and again and again," Clark said.
"All disclosure documents need to change, this is for every insurance contract for every fund in Australia and then it has to be coded on the administration systems, which largely falls to two organisations: Link Group and Mercer. That's not the only two but two organisations but they cover the bulk of superannuation funds."
"You think that all that work funneling down to largely two administrators from 1 July 2019, the operational risk in that and the risk around member outcomes. I frankly think sticking 1 July 2019 is reckless and it could be chaotic."
Take it seriously, APRA says
"From our perspective...rebuilding of trust around the whole industry not just life insurers is really important," APRA general manager Adrian Rees said.
"[Our advice to group insurers is] take all these things seriously, work through them give them due consideration particularly PJC findings were unanimous by a committee that was very broadly constituted and therefore warrants serious consideration by a responsible industry."
In regard to the budget changes, Rees said the regulator has already made its view known that the implementation period is ambitious and considerations should be given to alternative ways to make the transition.
The Royal Commission is due to look at life insurance in September and superannuation trustees will front the RC next week.
