Income protection (IP) insurance within MySuper offerings will be a way for superannuation funds to distinguish themselves from one another, according to an independent life insurance specialist.
"With funds relatively constrained by what they can do to differentiate themselves in a MySuper environment, group insurance is one area where funds will have great license to stand out from the crowd," AIA Australia general manager life insurance Damien Mu said.
"But funds need to consider both the needs of their members and the cost of both offering the insurance and administering. If they haven't offered it in the past on a default basis, then funds must also consider the tight timeframes required to meet the 1 July 2013 deadline."
However, an AIA Australia survey, based on 32 executives at 26 retail and industry funds, found 55 per cent of superannuation funds were looking to include default IP in their MySuper offer, alongside death and total and permanent disability insurance.
The remaining 45 per cent of respondents said the major reasons why they would not include IP were due to cost, personal nature of the protection and the difficulty in aligning IP with reasonable salary levels as a default product.
In addition, only 23 per cent of funds described themselves as being "well prepared" to implement a MySuper product, despite the 1 July 2013 deadline.
The majority of funds, 61 per cent, described themselves as still "overcoming areas of concern", with 16 per cent indicating their progress was "behind schedule but [were] confident of being prepared in the coming months", the survey said.
Mu said the survey results reiterated that the challenge would be greater for some funds.
"But at the end of the day, no-one benefits from a fund not being ready and this is where the importance of partnerships and collaboration will come to the fore," he said.
The issue of including detailed IP in MySuper products generated mixed responses from a panel of participants from BT Financial Group, REST Industry Super, Rice Warner Actuaries and Chant West at the AIA Australia Group Insurance Summit last month.
