The search for common standards on terminology and data

Group insurance roundtable

Part 1: New data rules forge missing link between insurance and super
Part 2: Can MySuper timeframes actually be met?
Part 3: The search for common standards on terminology and data
Part 4: Stronger Super - auto-consolidation or auto-confiscation?
Part 5: The post-election prospects for Stronger Super
Part 6: The outlook for group insurance
Part 7: Making funds transparent on insurance premium rises

A Super Review roundtable examines the challenges surrounding determining common terminology and standards on data.

Mike Taylor, managing editor, Super Review: A reality in the superannuation industry has been that getting common standards across not just data as it applies to the insurance or other things, but common terminology, common anything really – on even how you invest – has been a real challenge.

I’m reminded that ASFA, for instance, has from time to time produced documents that attempt to get common definitions – when you have fund mergers, for instance – common definitions of what we were all talking about. 

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That seems to be a very unfinished piece of work. The industry seems to be playing catch-up with what the Government is saying, but there’s unfinished work out there. To what degree do you think that’s right? 

Jeff Scott, executive manager, business growth services, CommInsure: Well I think come 1 July, 2014, next year, all the insurance definitions within super need to be aligned with the conditions release, so it means that for death, terminal illness, TPD, integrity capacity, there needs to be a consistent definition.   

If there are various ancillary benefits or occupation definitions inside super for any new contracts going forward after next year, those will suddenly be removed. 

So we get a consistency of definition with which to quote on across the industry, which means from an experience point of view, getting better data quality, not just on the number of claims that we have, but also that the definitions surrounding those claims now get better as time goes on. 

I think that from that perspective, not only is the number of claims or what they’re for going to be more structured with the APRA guidelines, but under the CIS definitions we now have a consistency of definition across the various funds going forward, which again improves the data quality, improves the consistency, improves the standardisation and hopefully improves the experience of both the trustee and the member. 

Jenny Oliver, group life, commercial manager, TAL: To your point though, the industry does have a good track record of banding together and solving ambiguity where it exists.  

The takeover terms is a great example of that and I think we’d all be keen to get together and work through some of the issues that do exist today with the provision of data.  

There’s a lot of information that’s provided, it’s incredibly important, the actuaries are becoming more and more sophisticated with their pricing and therefore the reliance on the data that is provided is increasing.  

Every aspect of that data can have an influential impact on the price for the member. 

We’re already talking with the FSC – a number of insurers are talking with the FSC – as to how we can come together and provide the clarity that is required to give everyone some confidence that when they receive data, they understand what it means and it’s accurate and complete. 

Andrew Bragg, policy director, Financial Services Council: Well it’s an interesting point, that a higher level of regulation will ultimately deliver a greater sense of continuity, consistency of definition. 

I think one of the better examples, if you go back and you look at this debate over the last five years, is around performance calculation.

APRA does performance calculation, Super Ratings does it, Chant West does it. How do you treat an admin fee, how do you treat an investment fee, growths on net?

All those sort of messy conversations will disappear because the trustee will be required to calculate performance in a way that a regulator has dictated.  

I think removing that unpleasant debate from the industry is a really good thing, because this is one of the areas where the rubber hits the road for them and they want to know what the return is.  

Every time they read the Sydney Morning Herald or the Sun, they pick up their business pages and it will say, this is what the return is – and there’ll be no one in those conversations saying, “but the return is not right because X, Y, Z”, so I think that’s a good step forward. 

Geoff McRae, senior analyst, Rice Warner: I guess something which I’d really welcome has been APRA’s willingness to seek input from the industry. 

I was a bit sceptical when their stronger separate proposals were first outlined in broad detail and about the growing role for APRA that I thought would mean a whole lot of regulation imposed on us, which was completely impractical.  

People might view some of the things as being impractical anyway, but they have gone out of their way to consult with people and take on board a number of issues when people have said, for example, “Well, what you’re suggesting is the practical order, it’s really five years out of date”.  

So they’ve been quite happy to take that on board and have changed significantly some aspects. 

Andrew Bragg, Financial Services Council: Good point. It’s a big cultural change for APRA. APRA’s been soberly a prudential regulator focused on governance and risk and then morphing into this more consumer world where they’re collecting stats and releasing what is undoubtedly consumer data. 

It’s been a big cultural shift and I think you’re right, they’ve done a very good job of that. 

Alex Hutchison, CEO, Energy Industry Super: I think also what APRA has done is also to roll out to the superannuation industry a number of the guidelines that apply to ADIs.  

There’s a lot of harmonisation going on – “if it’s good enough for a bank in relation to whatever, then the same should apply to superannuation”.   

I think that does two things: it creates harmonisation for institutions and also probably allows a bit of leverage off their own force as well.   

That’s quite good because as much harmonisation as possible is a positive thing and I agree, I think APRA has been quite co-operative. 

Adam Kirk, general manager, distribution, Australian Ethical: I think one thing that Stronger Super has done is enhance the collaboration between all the different companies in the industry.

We work together quite well in terms of trying to put forward a better solution for the end users and making sure that things like performance is clear to them so they don’t have to go through huge calculations to find out which one is better for them. 

Same with insurance: to get the additional data through so that the rates are correct and won’t be changing. There’s big benefits for the end user.