The rush to provide an attractive insurance benefit offering may mean group insurers lose out at claim time, according to a group insurance specialist.
Professional Financial Solutions (PFS) specialist group insurance consultant Rhonda Virtue said it was inevitable there would be oversights as benefit design becomes more complex and the amount of insurance cover provided increased.
"As the level of insured benefits increase the risk of a significant gap between what members understand they are insured for, through their member statements and other communications they have received, and what's actually insured increases also. It also leaves open the question as to who does the risk lie with?" Virtue told Investor Weekly .
"An administrative oversight for a $20,000 claim may not hurt anyone too much, but once you start getting into the $500,000 plus range, you do need to get it right in the first place."
She said while it was positive the underinsurance issue was well recognised in Australia, it remained important for the insurance system to be well supported.
Administration platforms had so far been built with investments in mind, not insurance, she said. Compounding this is the fact that there are few administrators with group insurance knowledge.
"Administrators will frequently tell you insurance issues occupy a lot of their time. Largely because of the increasing sophistication. Benefit designs have become more complex, more options are available to members and the amount of insurance being offered has increased dramatically. Systems have generally lacked the functionality to handle the basic group insurance arrangements, so underlying problems are being further exacerbated" Virtue said
Virtue joined PFS in November 2009 from Asteron, where she was responsible for preparing the company for its entry into the group insurance market.
She has nearly 20 years' experience in the group insurance and superannuation sectors and has consulted to major industry funds, master trusts and public sector funds.
At PFS she has been increasingly in demand as the industry grapples with the changing regulatory environment.
"Administrators are constantly playing catch-up due to the frequency of regulatory changes that are moving the goalposts constantly and unfortunately insurance keeps getting pushed down the list," she said.
"It is far easier to resolve issues ahead of a claim than trying to resolve who is to pay any shortfall after the fact".
