ASIC will pay particular attention to insurance in superannuation over the next year. This is according to its Corporate Plan, released in September.
Work on this front is already underway. ASIC recently reviewed the insurance services of 47 superannuation trustees, looking at:
- Complaints handling
- Rebates paid by insurers to trustees
- Whether members were defaulted into demographic categories that triggered higher premiums
ASIC found that:
- Complaints handling practices were poor and a third of trustees took more than 90 days on average to resolve complaints about insurance.
- Some trustees were automatically defaulting members as “smokers” when transferring them to different sections of the same fund, resulting in higher insurance premiums payable by those members.
ASIC will consult on stronger internal dispute resolution requirements for superannuation once AFCA commences in November. It intends these requirements to create greater transparency about complaints handling performance by superannuation funds.
ASIC has released Report 591 Insurance in Superannuation. This sets out actions trustees should take to achieve better outcomes for members who acquire life insurance through their superannuation funds.
The Royal Commission has also explored insurance in superannuation.
Message 1: In the Report, look for the heading “Next steps”, appearing at various points in the document. These indicate what steps the trustee should take but also what steps ASIC will take that may impact the trustee.
For example, ASIC says that, in 2019, it “intends to see whether claims handling processes have been reviewed by trustees in the three years before this check.”
Message 2: It stands to reason that ASIC will also investigate those insurance policies in superannuation that have been recommended through retail funds. Advisers must ensure that they have acted in the client’s best interest at all times and documented all discussion with clients to be able to demonstrate that they have acted in the client’s best interest and put the clients interest ahead of their own.