SMSF insurance headed for regulatory scrutiny
SMSF practitioners should ensure their clients are adequately documenting the need to consider insurance, as ASIC is likely to increase its surveillance of the insurance sector in general, an adviser has warned.
Hewison Private Wealth adviser Christopher Morcom says SMSF auditors are paying closer attention to the investment strategies for SMSFs, making sure they contain “due consideration to the insurance needs of members”.
“The trustees need to be able to demonstrate that they have taken the needs of members into account,” Mr Morcom said.
While this should be a straightforward process given the members are the trustees, it’s important this requirement of the investment policy is covered properly from a documentation and process perspective.
SMSF trustees need to be considering a range of factors when addressing the insurance requirement, including whether there are large assets in the fund, whether there are loans in the fund, the age of the members and their circumstances, Mr Morcom said.
“From ASIC’s perspective, the government’s ongoing review into remuneration is obviously going to have a massive impact in the insurance arena in years to come,” he added.
“That’s something that presumably ASIC is going to have the responsibility for overseeing, and obviously the commission and remuneration side is going to be a big focus of theirs in the future.”
This follows warnings that ASIC’s investigation into the sale of add-on insurance could have knock-on effects for the superannuation industry.
“However, given current scrutiny on retirement outcomes, past scrutiny on superannuation insurance, and the face that super members do still pay for the insurance, I think the super industry would be wise to read the ASIC report and take to heart any relevant lessons,” The Fold Legal solicitor, Jaime Lumsden Kelly, said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.