ASIC today released a report on the superannuation industry’s progress in improving consumer outcomes in relation to life insurance provided through superannuation.
Report 646 Insurance in superannuation: Industry implementation of the Voluntary Code of Practice (REP 646) comments on industry’s implementation of the Insurance in Superannuation Voluntary Code of Practice (Code). It also provides useful context about why a focus on insurance in superannuation, held by approximately 12 million Australians, is important.
ASIC Commissioner Danielle Press said, ‘We recognise that there is significant change occurring in relation to insurance in superannuation. In this dynamic phase, it is important that superannuation trustees remain focused and committed to improving outcomes for members.’
The Code sets standards of practice with the aim of improving industry practices in benefit design, claims handling and communications to members. 70 per cent of superannuation trustees are adopting the Code in whole or part but full implementation is not due for completion until 30 June 2021.
In the report, ASIC observes that some improvements in practices are being introduced as a result of adoption of the Code by a significant number of trustees. However, further work needs to be done to achieve the high industry standards consumers expect.
‘We identified a number of inconsistencies in implementation of the Code, some relating to fundamental aspects such as which members are covered by the Code, the controls around balance erosion, and calculation of timeframes for claims processes. Also, trustees are continuing to leave vulnerable members behind – they need to have better defined policies and processes for those with unique needs,’ Ms Press said.
ASIC’s report of today follows the release in October 2019 of Report 633 Holes in the safety net: a review of TPD insurance claims (REP 633) focused on total and permanent disability insurance, much of which is held through superannuation.
ASIC also plans further work looking at issues relevant to consumer outcomes in relation to insurance in superannuation. It is anticipated that this work will lead to the release of additional reports this financial year containing observations about the extent to which existing market practices concerning insurance in superannuation are delivering good outcomes for consumers.
Background
Since January 2019, ASIC has been engaging with industry to understand how trustees’ efforts to implement the Code are benefiting members. Our work is not intended to and does not replace monitoring of compliance with the Code by an appropriately resourced Code monitoring body. In ASIC’s view the absence of such a body is one deficiency of the Code.
ASIC and APRA are working in tandem to improve consumer outcomes in insurance in superannuation, with APRA recently releasing a consultation paper on proposed revisions to prudential standards (SPS 250).