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Zurich

How to solve a problem like TPD?

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Zurich introduces new assessment criteria as part of an innovative rethink of misunderstood cover.

An insurance purchase generally entails an expectation that when the ‘wheels fall off,’ financial loss is compensated by an equivalent claim payment.

Historically some total and permanent disability (TPD) contracts, have fallen short of this expectation as claimants are required to be injured to the extent they’re deemed unlikely to ever work again. This severity benchmark and occupational claim hurdle have contributed to recent media coverage around TPD claim denial rates and the frequently held misconception that you virtually have to be permanently hospitalised to claim against TPD. with such disconnect between financial loss and claim outcome, it is easy to see why some observers have questioned the value of TPD.

Contrary to the idea TPD claims are ‘pigs might fly’ type events, or life insurers might force a librarian to work as a truck driver, Australian life insurers pay hundreds of millions of dollars in TPD claims each year. In reality, we know TPD can be a vitally important part of the protection strategy and the financial assistance it provides changes lives, but with that said, it’s important to acknowledge that not all TPD contracts are created equal.

As part of its recent risk product overhaul, Zurich has re-engineered its TPD offering by adding a number of additional – non-occupation based  – assessment criteria to flagship Wealth Protection product.

Zurich’s medically based claims alternative that alleviates reliance on a client’s future ability to work is known as extended activities of daily living (Extended ADLs). To further improve the confidence around the TPD conversation and better align claim outcomes with client expectations, a partial and progressive payment system is also available through Zurich’s platinum TPD feature.

Extended ADLs – moving beyond the self-care definition

It’s critical to acknowledge that whilst most traditional TPD products include a form of ADL cover, Zurich’s approach is distinctly different.

The extended ADL framework captures a much broader range of assessment criteria’s and qualifying benchmark at claim time are considerably more lenient. For example, whilst traditionally ADLs centre around the claimant’s ability to self-care, Zurich’s approach expands the qualifying criteria to include an individual’s functional status across the following six categories:

  1. Self-care
  2. Communication
  3. Physical activity
  4. Sensory function
  5. Hand functions
  6. Advance functions.

So let’s look at the practical application and the benefits the extended ADL framework con deliver clients.

 

[via FINANCIAL STANDARD]

Exchange traded products

ETP demand grows, fees stable

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Exchange traded products (ETP) are charging fees disproportionately to the dramatic growth in assets and number of products available, according to Rainmaker data.
Between March 2013 and 2017, ETP funds under management quadrupled from $ 7.2 billion to $ 27.2 billion, while the number of products in the market doubled from 79 to 155.
EPT products have gained sufficient size to counteract the effect of lower fees on the original product and kept the overall weighted Management Expense Ratio (MER) the same, the quarterly ETP report said.
It found BlackRock, Vanguard, State Street, BetaShares, Magellan, Van Eck, Russell and ANZ ETFs comprise 98% of the market and among them, charge a wide range of MER of 0.18% per annum, followed by State Street at 0.25%. Magellan’s weighted MER is six times that of Vanguard’s across three of its actively managed ETPs.
What the data ultimately shows is there “is no correlation between a manager’s ability to gather assets and fees being charged.”
“The largest asset gatherers ran the gamut of fees structures and product types. What this does show, however, is that the Australian EPT market is continuing to evolve into the product offering the associated fee structure,” it said.
In the 12 months to March, ETP FUM rose 28% to $27 billion, with a marked shift to international equities and fixed interest assets classes.
International equity ETPs were the most active during the period with 72 products launched, followed by Australian equities with 46, fixed interest with 17 and commodities with 11.

[via FINANCIAL STANDARD]

Education key in combating elderly financial abuse

Education key in combating elder financial abuse

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Financial advice practices will be able to equip staff with greater knowledge and understanding around identifying and preventing elder financial abuse through a selection of new education and training materials.
Protecting Seniors Wealth has launched a range of resources including presentations, training courses, and publications to create awareness and assist in developing strategies to deal with senior and elder financial abuse efficiently.
The company believes financial planners are in a unique position to assist in protection seniors and their wealth as they assist in the management of their finances and so should incorporate this sort of training into their business plains, promoting trust and building on their business’ reputation.
“Seniors and elders are prime targets, they hold the largest share of wealth and often need assistance dealing with unwanted financial predictors, and the focus is on the seriousness of this issue – rapid increases, how seniors are impacted how much money and assets are being stolen.” Protecting Seniors Wealth chief executive Anne McGowan
“its motivational and provides opportunity to relate in terms of possible loss of their own clients and funds, providing strategic insight and knowledge for assisting to be money gatekeepers.”
McGowan believes the findings of the Australian law reform commission’s inquiry into Elder Abuse will indicate the need for more education, with the new resources working toward fulfilling the need.
“The disturbing consequences of this form of abuse are so profound that when financial perpetrators take senior elders money and assets, they often also take the funds they need for their lifestyle and age care, along with their dignity and the inheritance they plan to leave loved ones, resulting in the final insult – inheritance being stolen or taken as well,” McGowan said.
Resources from Protecting Seniors Wealth can also be tailored for CPD accreditation.
Separately, the Australian Tax Office (ATO) is reminding Australians to stop and think before giving their personal details or hard earned money to scammers this tax time.
Assistant Commissioner Kath Anderson said 48,084 scams were reported to the ATO between July and October last year.
“we have already seen a Five-fold increase during the tax time period,” Anderson said.
“Already this year, the ATO has registered over 17,067 scam reports. Of these, 113 Australians handed over $1.5 Million to fraudsters with about 2500 providing some form of personal information including tax file numbers.”

[via FINANCIAL STANDARD]

Super funds return 2.9%

Super funds return 2.9%

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Superannuation funds have returned an average of 2.9% for the 12 months to 30th June as measured by the SelectingSuper workplace default option MySuper Index, propped up by property and fixed income.

The SelectingSuper workplace default option MySuper Index showed a negative 0.9% monthly return in June.

However, combined with the positive return in the period March to May, the rolling 12-month performance for the 2015-16 financial year was a positive 2.9%.

The monthly fall in superannuation performance in June was driven by a fall in both Australian and international equities. The negative return for super funds in the latest month comes at the end of a period of relatively volatile returns in the first six months of the 2016 calendar year.

The positive 2.9% performance for funds in the 2015-16 financial year, although lower than prior years, was nearly 2% above inflation for the period.

The performance over multi-year time periods benefits from the positive impact of high returns in the years 2013-15. Reflecting this, three-year rolling MySuper returns are 8.3%pa and five-year returns are 8.1%pa. The longer term 10-year return is a more modest 5.2%pa although this period incorporates the full effect of the GFC and is overlaid by a lower inflation environment.

On an annual basis, Australian equities, often the largest asset class in many balanced funds, positively contributed a 0.6% return as the market has progressively drifted down since early 2015. The contribution of international equities has been a positive 0.4%, although this impact has been muted by many funds through hedging inbuilt within their portfolios.

Property has continued to provide a significant positive impact on fund investment outcomes with the listed property sector having a positive 24.5% return in the 12-months to end June. To further highlight the positive impact buffering that property has had on superannuation returns, the three-year average return to June 2016 from listed property is 18.5%.

Over the year ended June 2016, the fixed interest index return was a strong 7%, although, on average, fixed income portfolios within superannuation funds underperformed this index. Meanwhile, cash returned a modest 2.3% over the same period.

In net terms, this means funds with relatively high exposure to Australian equities and international equities underperformed in the 12 months to end April. Similarly funds with relatively larger holdings in property and potentially fixed interest outperformed in the period.

Regarding the market segments, the gap between not-for-profit (NFP) funds and retail funds within the Workplace sector continues. The 12-month return gap is now 120 basis points in favour of NFP funds. The long-term five-year segment gap is 30 basis points in favour of NFP funds.

[via the Financial Standard]

How super investment option fees vary

How super investment option fees vary

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Superannuation members who have selected an investment option other than their fund’s balanced option may be paying more in fees than they realise, according to research by Rainmaker.

The Researcher said investment management fees generally account for around half of the total fees paid by members.

However this is based on the average member who remains in the default investment option (around 40%) there is a range of members who elect to choose their own option, and for these members, the investment management fees vary significantly.

A review of the option specific fees across 30,000 individual investment option within Rainmaker superannuation database shows fees varied significantly by asset sector and by type of fund. the analysis also shows the fees for selected options were significantly higher than the fees for the default investment options within workplace funds.

The average investment management fee for workplace super is currently at 0.62%. However, once you step out of the MySuper default options, the comparative investment fee increases meaningfully.

The average fee for a diversified option is 0.84%, over 20 bps above the fee for the workplace default option.

Growth diversified options carry a slightly higher average of 0.87%.

The price of diversified options for retail superannuation funds is on average around 25 bps above diversified options for not-for-profit superannuation funds.

The range of investment fees is wider in respect to asset specific options. While cash and fixed interest options are, on average, below 0.5%, the average fees for equity options are 1.1%. Above these, options for alternative and hedged assets average 1.2% and 1.9% respectively.

[via FINANCIAL STANDARD]

Shorten attacks government

Shorten attacks government’s retro super changes

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Federal Opposition Leader Bill Shorten used his budget reply speech to label the government’s superannuation changes as “retrospective” and reaffirm labor’s election policy on the $2 trillion industry.

The government announced a $500,000 lifetime cap will be applied to after-tax concessions on superannuation as part of the wider agenda to slow retirement savings being purely wealth accumulation for higher income Australians. The measure will include contributions backdated to 2007.

Shorten called out this retrospective view, yet also used his budget reply to accuse the government of pinching Labors superannuation ideas.

“Labor will gladly support our own clear and costed policy to close the unsustainably generous superannuation loopholes at the very top end. We welcome the fact that, three years after they voted to abolish Labor’s low-income superannuation contribution the Liberals have decided to keep it and simply rename it,” Shorten said.

He added the government was dangerously undermining super by claiming 4% of Australians in the super system will be affected by a budget change. He also took a shot at the government’s proposal to remove regulations that restrict people between 65 and 75 from making contributions to their superannuation.

“Labor will never apologise for standing up for Australians who go to work every day and want to come home safe, who rely on penalty rates to make ends meet, who do not want to be forced to work until they are 70,” Shorten said.

Shorten further announced a range of measures that would see $71 billion of “additional budget improvements over the decade.”

Labor still proposes a 25% tax cut for small businesses with a turnover of less than $2 million a year and delivering 50% renewable energy by 2030. It also backs its plans to “turbocharge” Infrastructure Australia with a new $10 billion funding facility, ” a concrete bank to get investment from the private sector, particularly big super funds, flowing into projects.” Labor says their infrastructure projects would add 26,000 jobs.

Labor is not supportive of budget measures that give the richest 3% of Australians another tax cut and reducing the marginal tax rate for individuals who earn more than $180,000 a year.

[via FINANCIAL STANDARD]

Sunsuper

Sunsuper overhauls TPD cover

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Sunsuper has overhauled it’s total and permanent disability (TPD) insurance cover in a move that will see an average premium reduction of 15% for more than 90% of its one million members.

The new product, TPD Assist, will remove waiting periods for a majority of claims as well as a replace lump sum payments with annual support payments. It is part of a wider initiative to encourage members to return to work where possible.

A study of Sunsuper members who had previously been paid a TPD claim found that 36% had returned to work or were actively seeking employment. It highlights that ‘permanent’ is not necessarily forever and many members want to return to work, Sunsuper said.

Sunsuper’s head of product Wanda Britton said TPD Assist focuses on being there for members when they need it most, both financially and emotionally.

Britton added the new tailored product “means that most of our members will see an average reduction of 15% in their combined annual death and TPD Assist premiums.”

This will work by reducing current TPD rates by about 30% and partially offset by an approximate 15% increase in death rates. The increase death rates are from a spike in death claims at the fund and across the entire industry during 2015. If Sunsuper didn’t introduce TPD Assist, combined premiums were likely to increase.

Britton said, as an example, for a member who suffers a back injury, they or their employer can contact Sunsuper on diagnosis to immediately begin the claim process. the member is then referred to a Vocational Rehabilitation Specialist who will work with them, their employer and their treating doctor to support them with a tailored program.

“Once the member is assessed as meeting the definition of being totally and permanently disabled, they will receive their cover in six equal annual support payments over five years – unless they’re able to return to work earlier at which time the payments would have stopped,” Britton  Said.

The new product will launch on the 1st of July, 2016, and was developed based on 18 months of research in consultation with more than 1000 Sunsuper members.

[via FINANCIAL STANDARD]

ING Direct FPA

ING DIRECT inks deal with FPA

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ING DIRECT has signed a referral deal with one of Australia’s top financial planning associations that will benefit customers of its Living Super product.

Professional practices which are certified by the Financial Planning Association (FPA) will provide comprehensive financial advice to ING DIRECT Living Super members who ask for it, under a nine month pilot that starts next month.

“We see professional, independent, face-to-face financial advice as increasingly important to our customers in preparing for retirement,” ING DIRECT national partnership manager of residential and wealth, Tim Hewson said.

“In recent years we’ve seen an uptick in super consolidation and switching and increased demand for transparency and control. Australians want to get ahead with their super, which aligns with our proposition about helping our customers to get ahead through value, fairness and transparency.”

FPA chief executive Mark Rantall said that the partnership has been modeled on the one that the association recently signed with Cbus.

“It will help the FPA open more pathways to connect Australians to quality financial advice,” Rantall said.

The deal “strengthens our ties with the superannuation sector and brings us one step closer to achieving the FPA’s vision that through our members, we stand with Australians for a better financial future.”

The first FPA adviser consultation will be at no cost for Living Super customers and only a limited number of places for FPA Professional Practices will be available in the pilot stage.

Initial participation in the pilot referral program will be limited, based on geographic requirements.

via [Financial Standard]

Aussie consumers

Advice beats direct insurance for Aussie consumers

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The majority of Australian consumers prefer to purchase insurance policies through financial advisers rather than directly.

This is the conclusion of Asteron Life’s Attitude to Life Adviser Insights report, which surveyed 1,515 Australians across every state. It found that 90% of respondents found life insurance too complex to navigate on their own, and consequently 65% were purchasing policies through financial advisers.

The report also showed that generation Y consumers are a high growth area for insurance advice; while only 21% in that category said they regularly saw an adviser, the report argued this presented a major opportunity as these consumers grow older and their financial risks increase accordingly.

“As more Australians move online to research and match their needs, there is, and will continue to be a need for personalised and professional advice,” said Asteron Life executive manager Mark Vilo.

“It’s essential for advisers to have an online presence and be seen where your clients are researching. By factoring this into your business strategy and the way you provide your service, you can use the power of the internet to help grow your business.”

He added, “As advice practices wind down for the holiday season there’s an opportunity for a period of reflection and some time to work on the business plan for the year ahead. Many Australians also use this time to reflect on their lives from both a personal and business perspective.

“Understanding the generational needs of your clients will facilitate meaningful conversations around their individual needs. It’s a good idea to segment your client base according to a combination of risk, income, generation and life stage and build this into discussions.”

via [Financial Standard]

Women in super

Women own less than 40% of super assets: ASFA

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The share of superannuation assets held by women has plateaued over the past four years according to Australian Bureau of Statistics (ABS) data exclusively compiled for the Association of Superannuation Funds of Australia (ASFA).

Women now hold 36.4% of Australia’s superannuation assets but this number has remained steady in the four years to financial year 2013/2014. Women have also experienced a lesser percentage increase than men in average balance at the time of retirement, with the average balance for men increasing by 48.5% over the two years to 2013/14 compared to 31.6% for women.

ASFA chief executive Pauline Vamos said this reflected the different work patterns and earnings levels of men and women in their pre-retirement years.

“Even though account balances are increasing overall for women, the statistics still show that men are more likely to have superannuation than women, and also that men on average have a higher account balance. In many cases, broken work patterns and lower average wages still impede on women’s ability to save for retirement,” Vamos said.

Average superannuation balances have increased for both men and women according to the ABS data.

The average balances in 2013/2014 for all persons aged 15 and over were $98,535 for men and $54,916 for women. This is about a 20% increase from two years’ prior where average balances were $82,615 and $44,866 for men and women respectively.

Average superannuation balances at the time of retirement have also increased, to $292,500 for men and $138,150 for women in 2013/2014 from $197,000 and $105,000 respectively in 2011/2012.

Vamos said gender disparity in superannuation balances is now on the agenda, and the next step is for government, employers and individuals to take action.

“ASFA has proposed a number of options for improving the economic security of women in retirement, including raising and broadening the Superannuation Guarantee, retaining the Low Income Superannuation Contribution Scheme and amending annual contribution caps to enable people with broken working patterns to ‘catch up’ their superannuation contributions,” Vamos said.

For individuals in their early 30s, average balances rose to $36,400 for men and $25,550 for women in 2013/2014, almost two times the average balances of $20,000 for men and $14,000 for women two years earlier.

According to the ASFA Retirement Standard, a single person will need a minimum of $545,000 in superannuation at retirement to live a comfortable lifestyle. This is assuming that they will draw down all of their capital over the duration of retirement, and that they will receive a part Age Pension.