Aussies 'confused and overwhelmed' about insurance through super
Consumers engaging directly with their super fund on insurance matters are often left confused and overwhelmed by the information provided and upset they cannot get guidance specific to their circumstances, an ASIC report shows.
A third of unadvised superannuation fund members participating in ASIC's research into member experience when making changes to insurance arrangements reported feeling confused, overwhelmed or uncertain after interacting with their fund.
"They found insurance complex and difficult. Some discovered information they did not understand or did not know how to respond to," ASIC says.
"This often caused them to delay in engaging further with their fund on insurance after their initial interaction."
Prepared by Susan Bell Research, the report draws on 50 in-depth interviews with members who had engaged with their super fund around group insurance within the last year. Completed between May and June, some of the participants were already thinking about the impact of COVID-19.
The research found that the process of gaining information about insurance arrangements or making changes to insurance presents several potential hurdles due to limited knowledge and a lack of confidence brought on by the complexity of web-based information.
Most members expected this to be a simple self-service process but found that was not the case, the research states.
Another reason respondents felt dissatisfied with their experience was because they had not received information that was specific to their circumstances.
While none of the respondents used the word 'advice', many said their reason for contacting their fund was to find whether they had "enough" insurance cover, whether they should have two of the same policy or how much cover they should have. These are the members that reported having the most difficulty and were frustrated to find their fund could not tell them without referring them to a financial adviser.
This demonstrates members only have a vague idea about the information super funds can provide and do not understand the demarcation between the two, the research states. It also notes that it is possible the members did receive advice but were unaware that they had.
In all, only half of the respondents reported achieving the goal they had set out to when making contact with their fund. Some were able to do so in one contact session.
"Some members discovered during this process that they had default insurance which did not seem to be adequate for their needs. Some discovered that their cover was much less than they thought it was," the research states.
"Some discovered that they were paying for insurance inside super when they already had some outside super."
The research suggests many of the problems encountered by members could be avoided if information was easier to find online and easy to understand.
"There is now a fairly general expectation that the super website will contain such information, but the level of accessibility varies with the fund," it reads.
"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. There are also tools that can enhance the experience and generate confidence and understanding."
Potential improvements proposed include providing information to members that helps them understand the difference between insurance products on offer, whether it is possible to claim on more than one policy and the implications of pre-existing conditions on switching. Calculators that help members determine the level of cover that they might need for their general day-to-day and also in specific circumstances would also assist, the research says.