A couple of recent events got me thinking about this theme, one that is probably most accentuated in heavily regulated sectors, but which I am sure is replicated endlessly across others.
There may be better ways to describe what I am calling ‘proxy accountability’, which I coined during a roundtable discussion this week hosted by financial services research firm, CoreData, but this will do as a working piece of verbology.
A conversation about drivers of trust prompted me to ask a question about a possible tension between authenticity and accountability. How authentic is it to be held accountable for the actions of others, or circumstances that direct your own actions? An earlier event highlighted the underlying tension that I was talking about.
The case in point was coverage on the ABC’s 7:30 current affairs program of a hike in insurance premiums by a not-for-profit industry super fund, LUCRF. The report featured disgruntled members aged over 55 who had received notification of an increase in premiums, reduced life and disability cover, or a combination of both.
They blamed the fund for a substantial rise in fees, an action that prompted by changed regulations. These are designed to protect younger super fund members with low and inactive (non-contributory) account balances from erosion of retirement savings by excessive or unnecessary insurance premiums. It’s a little more complicated and only one dimension of a broader regulatory package, but that’s it in a nutshell.
Whether the quantum of those premium and cover changes was appropriate is a separate issue and depends on how well the fund has conducted the cost-benefit analysis across its cohorts of members. Given this regulation is to apply universally from 1 July 2019, there will undoubtedly be more funds in the crosshairs of members on the same issue in the months ahead.
What is interesting from a brand perspective is that the organisation has been blamed for impact of changed regulation beyond its control, the phenomenon I am referring to as ‘proxy accountability’.
Argue as much as you like about how effectively changes to regulation have been communicated to members, the narrative doesn’t wash with lifelong members who have paid insurance premiums for years for nothing more than peace of mind.
Profit-to-member funds, like LUCRF, are generally regarded as pretty authentic. Their value propositions articulate that everything they do, every decision they make, is filtered through the prism of what is in their members’ best interests. In fact, if this is not the case, then they’re breaching a core regulatory requirement.
While legal obligation is to act in the collective best interest of members, individual members assess outcomes by what is in their personal best interest. Authenticity for the collective, can be viewed as a breach of trust by individuals or cohorts.
The regulatory change called ‘Protecting your super’, nicely positions politicians and their new rules as saving fund members from financial services businesses flogging unnecessary insurance cover.*
This would be all well and good if this was the case. The reality is that separate legislation also requires that, to secure an appropriate licence from the regulator, funds offering default cover in Australian workplaces must bundle in a minimum level of death cover, including for the young members with inactive low account balances the new legislation seeks to protect.
It means that as people change jobs and, more often than not just start an account in another super fund selected by their employer, they can end up with a bunch of zombie superannuation accounts with legacy insurance packages.
The rule changes are therefore well-intentioned, reducing or eliminating insurance cover and premiums in these zombie accounts often held by younger members, which have effectively been subsidising cover for older fund members who are more likely to claim.
Credit to the 7:30 team, which did a fair job of balancing the story by seeking a response from LUCRF, which provided a written statement, and securing one from the CEO of the industry funds’ member body. This established that the issue was not born of a breach of trust or even lack of authenticity on the part of the fund or other funds that are rolling out similar communications.
Nonetheless, the members featured on the program - and no doubt others - hold the fund accountable as a proxy for their discontent with the rule changes - and that’s the point of tension with what they believe is the brand’s authenticity and value proposition as a custodian of their interests.
* For a rivetting read, you can find more on the Australian Government’s Treasury website by clicking here.
Disclosure: I consult to a profit-to-member superannuation fund on strategic communications and public affairs.