The risks associated with managing the insurance tender process were getting worse, the Australian Institute of Superannuation Trustees Superannuation Insurance Symposium was told this week.

With the continuing evolution of group insurance offerings through superannuation, funds are increasingly facing the challenge of negotiating tender processes.

Funds also have to manage complex legal and risk management issues in relation to insurers.

The risks associated with getting it wrong were serious and potentially costly, a group of panel members said at the Melbourne event. 

Industry Fund Services Insurance Broking principal Nick Galankis said it was essential the risk management framework was articulated from the outset of the tender process.

"You need to assess the impact of all possible risks and quantify the possible losses, and decide what the treatment will be," Galankis said.

Trustees needed to consult widely to ensure all requirements and limitations were taken into account, he said.

"The worst scenario is having negotiated what you think is a great arrangement with the insurers and then finding out that their system doesn't work with your administration system," he said.

Holding Redlich partner Jenny Willcocks said problems in the tender negotiation process often occurred because parties had not settled all the issues before the policy documentation was finalised.

"If there is a mismatch at this point between the expectations of each party, you're going to have damage to the relationship before you even get started," Willcocks said.

She cited two cases where such a mismatch resulted in the superannuation funds inadvertently misleading members as to their policy coverage.

The cases resulted in enforceable undertakings and millions of dollars in compensation.

"Many trustees don't carefully scrutinise the policy to ensure the document covers everything you agreed to," Willcocks said.

The tender document could also raise the possibility of issues such as marketing,

"We all know we have a big underinsurance problem, so why not see if the insurers are prepared to help fund an education campaign? They may have innovative ideas on that front if you give them the opportunity," Willcocks said.