Insurance Changes 28 October Webinar for accredited financial advisers Date: 31 October 2017 Presenter: Richard Weatherhead, Head of Insurance

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1 Insurance Changes 28 October 2017 Webinar for accredited financial advisers Date: 31 October 2017 Presenter: Richard Weatherhead, Head of Insurance

2 This is general information only This information is of a general nature and does not take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, consider your financial requirements and read our Product Disclosure Statement, available at australiansuper.com/adviserresources or by calling Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns. AustralianSuper Pty Ltd ABN AFSL Trustee of AustralianSuper ABN

3 Presenter Richard Weatherhead As Head of Insurance, Richard and his team are responsible for the Fund s insurance products, ensuring they are competitive and sustainable to meet the needs of members whilst following the Fund s values. The product development process includes initiation, detailed design and distribution to achieve the Fund s strategic and operational goals. Richard has over 38 years of experience within the Wealth Management industry within Australia and the UK. He has advised most of the leading life insurers and superannuation funds in Australia on pricing, insurance risk management, claims process optimisation and product design.

4 Important insurance changes On 28 Oct 2017, we re making changes to our insurance: Move from Units to a Sum-insured (agebased) default scale Cover level changes, particularly for members with automatic cover Finsuper is closing Prices are changing

5 Age-based default scale

6 Age-based default cover Units will be removed and replaced by a single default sum-insured scale; to be known as age-based cover Reflects insurance needs, member preferences and affordability Follows closely to the current unit-based default sums insured that has applied for members joining since November Better aligned with insurance needs, which change with age Removes the complexity of providing needs-based cover through increasing the number of units with age Easier concept to communicate

7 Age-based basic cover: Death & TPD Sum insured 200, , ,000 50,000 0 Death TPD Age reached Weekly Costs Total Death & TPD $0 $0.69 $1.58 $2.68 $3.46 $4.10 $4.73 $4.66 $3.75 $2.14 $1.48 $0

8 Age-based Default - Death &TPD All members with units will be moved to the new scale. If the member has: Default units and Standard work rating: members will move to the new scale, even if cover increases or decreases (Industry only) Members with pre-2014 TPD units will experience a drop in cover (often by two-thirds) Members under 20 will lose Death cover (all divisions) this will automatically commence at 20. Non default units, Low Risk or Professional work rating and PSD / Finsuper default units: members will receive a multiple (or fraction) of the new age-based default to match the current sum-insured Fixed cover: no change. Cover will remain fixed. Multiples of $1000 for all divisions. All new members will receive the new age based sums insured (PSD and Industry). (Special employer arrangements excepted).

9 Adding extra cover Death & TPD Extra fixed cover can be added to the age-based default cover This allows cover to follow the age-based curve 600,000 Dial-up 1 (AAL) 500,000 Sum insured 400, , ,000 Extra cover ($320k) 100,000 0 Basic cover Age reached Members can also fix all their cover if they wish

10 Death & TPD Dial-ups Dial-up 1 ($600,000) and Dial-up 2 ($1m s.t. max of 10x salary) remain unchanged The amount of extra cover to apply is assessed at date of applying the cover, then will remain fixed even if the Dial-up limit is reached at some point The example below is for a 24 year old who increases their cover up to Dial-up Dial-up 1 (AAL) Extra cover ($500,000) Basic cover $100, Age attained Members can choose to fix all cover

11 Age-based basic cover Income Protection Sum insured 3,000 2,000 IP per month 1,000 Age 0 Age Total weekly cost $0 $0 $0.65 $1.38 $2.55 $3.75 $5.27 $7.14 $9.27 $12.31 $15.00 $0 These are the levels of basic cover at selected ages. Different levels of cover and costs apply at other ages. Premiums are for 2 year 60 day IP.

12 Age-based Default IP If Member has: Default units: Member s cover will be moved to the new scale even if cover increases or decreases Non default units/fixed cover: members will be moved to fixed cover to match the current sum-insured PSD and Finsuper: members will be moved to fixed cover to match the current sum-insured Fixed IP cover will be in multiples of $100 per month (currently multiples of $500 per month)

13 Adding extra cover - IP Any change to IP cover (up or down) will be applied as fixed cover only Dial-up 1 ($10k pm) and Dial up 2 ($20k pm) will continue to operate in the same way as now. IP will be applied in multiples of $100 pm

14 Product Changes

15 Product changes IP with a 5 year benefit period to be introduced as a member option to Industry and PSD, and IP with benefit to age 65 to PSD. Underwritten only Some occupations excluded Cover ends at age 65 Removal of 90-day unemployment rule from IP benefit will be based on earnings in the 12 months prior to disability. PSD TPD to cease at 65 (not 70). Members over will be grandfathered. IP will be activated for Public Sector Division members who have received recent employer contributions as a one-off bulk activation.

16 Price Changes

17 Important messages 2% reduction for Death (average) 13% reduction for TPD (average) 21% reduction for default IP (average) On a like for like basis 75% of the members will have a price reduction (85% when moving to the new default) Some members will lose some of their cover but option to opt back to previous amount We sent 1.2 million annual statements and insurance factsheets by

18 Price changes by age and work rating Death and TPD

19 Price changes by age and work rating Income Protection

20 Important messages (continue) We are 15% cheaper than 11 years ago

21 Calculators

22 Finsuper closure Finsuper will be closed and members moved to Industry Existing members will: Receive a professional work rating and matched sums insured Retain a 30-day waiting period on IP. Will no longer be required to complete accumulated sick leave if it exceeds 30 days. New members of ex-finsuper employers will: Default to a Low Risk work rating Have 60-day waiting period for IP Tapering will apply to fixed TPD over age 60 for ex-finsuper members from their next birthday Older members with IP will continue to be grandfathered IP with a benefit period to age 65 will be available on an underwritten basis only Spouses will be moved to Personal division

23 Thank you