Ronna Ludgate, director of financial risk management at KPMG, told the 2013 Actuaries Summit that the advent of the MySuper reforms would change the structure of the superannuation industry and that increasing competition could see the industry drop default super prices.
“[MySuper] is a big change in [funds] having to be more proactive in retention and much more clear about their value proposition if they want the customer to activate choice,” Ms Ludgate told delegates.
“Part of that is what bells and whistles can you put around that to make yourself look different under MySuper to everyone else, but part of that is potentially a race to the bottom on price.”
Ms Ludgate said that the prescriptive MySuper regulations will make innovation more difficult in the sector, as funds try to balance a point of difference and maintain compliance.
Concern is growing that if superfunds drop prices on their default options, consumers will be the ones that miss out on benefits, she said.
“[It's] a real concern in terms of what it actually means for the client,” Ms Ludgate said.
“They’re not going to get very much and if this is their default option - and most of them don’t know any better- is that going to be enough for them in the long run?”
With underinsurance a continuing industry issue, Ms Ludgate said the MySuper reforms are likely to either maintain or accelerate the problem.
“It will be really difficult for [consumers] to actually get a sense of what they’re covered for, what they’re not covered for and therefore what they might need over and above that,” Ms Ludgate said.
“The bottom line is we think underinsurance will continue or increase under this new regime.”
