Superannuation funds have been urged to improve the way they communicate about group insurance with members as new research found one-third say they felt confused, overwhelmed or uncertain after initiating contact about their policies.
Many commented on the complexity of insurance and how difficult it was for them to make decisions on what to do, according to the research commissioned by the Australian Securities and Investments Commission (ASIC).
“Insurance in superannuation is complex and it is widely acknowledged that members’ awareness and understanding of it is relatively low,” ASIC says. “Our consumer research has highlighted that a number of fund members who directly engage with their insurance found the process challenging and weren’t always able to achieve what they set out to do.
“The research found that the process of gaining information about insurance arrangements from their super fund or making changes to the insurance presented several potential hurdles to many members.”
ASIC says the research, based on interviews with 50 fund members aged 25 to 60, seeks to understand their experiences when they tried to review their covers, change policies, make a cancellation, change their occupational classification or do a product comparison.
About half of the 20 million-plus super accounts have life insurance attached and the majority hold the default cover offered by their fund trustee.
The research report says members with the most knowledge and understanding of insurance products tend to be those who had learned about it at work.
However it was more common to find members who did not know what the different types of insurance were for, especially when it came to income protection cover.
“In sum, when members contact their super fund about their insurance there is a strong likelihood that some are doing so from a low knowledge base in language that may not be technically correct,” the research report says.
“The biggest problem is poor knowledge of disability insurance, specifically what each type covers. It is worth bearing in mind that the vast majority of these members had never made a claim on any of these policies and did not know anyone who had.”
The research says many of the problems experienced by members would probably have been avoided if the member had known where to find the information that they needed, in particular on the website, and if it was easy to understand.
“There is now a fairly general expectation that the super website will contain much information, but the level of accessibility varies with fund,” the report said. “Many members lack the confidence to rely on web-based information, especially if it appears complex.
“The challenge is for the super funds to prioritise a straightforward approach to answering the most common questions and to test the usability of their approach.”
Click here for the report.
