ASIC identifies problem areas for APRA funds
In a report that looks at the experience of superannuation members, ASIC has examined some areas requiring further improvement for APRA-regulated super funds.
In the Member experience of superannuation report, ASIC identified some of the potential risk areas for APRA-regulated superannuation funds including inadequate disclosure about insurance cover in superannuation, inadequate notification about changes or cessation of insurance cover, and concerns with marketing materials and communications provided by super funds.
ASIC said in the report that disclosure about insurance cover in superannuation is sometimes inadequate, with inconsistencies between policy documents, PDSs, and other disclosure material from the trustee.
ASIC said it expects trustees of large super funds to review their disclosures about insurance cover, especially disclosure about exclusions and limitations in cover.
“For example, exclusions for hazardous occupations or situations in which claims may be denied for non-disclosure of medical conditions by the member,” the report said.
The report also stated that trustees of larger funds need to ensure that disclosure about insurance is consistent in policies, PDSs and other disclosure material.
“ASIC’s Insurance in Superannuation project is following up on these issues in 2017. Where we find poor disclosure in this project, we will take further regulatory action and make public the outcomes of our work,” the corporate regulator warned.
The report also identified issues around trustees defaulting members as ‘smokers’ or ‘blue-collar workers’ for insurance purposes when moving members between divisions of funds.
“Even if disclosure of the change is made to members, the higher insurance premiums can have a significant adverse financial impact on disengaged members,” the report said.
The report also found problems with terminology used on product dashboards for large funds, with some of the terminology inconsistent.
“Given the importance of product dashboards and the ASIC guidance already provided, we may take stronger regulatory action, including issuing stop orders, where dashboards do not meet the requirements. Failing to meet the requirements may also be an offence,” the report warned.
Calculators are another concern for ASIC, with some large funds offering generic calculators prepared by third parties.
“It is sometimes not clear on the fund’s website who is responsible for the calculator and the results that it generates,” the report said.
“Trustees are responsible for the decision to include a calculator on their website. In providing a third-party calculator, trustees need to consider their SIS Act obligations to act in the best interests of members.”
ASIC also noted that none of the trustees in the review had a strategy to address communications with vulnerable consumers including indigenous and Torres Strait Islander members.
ASIC said the findings of the report will also inform two of its compliance projects which are under way in superannuation for 2017 – Employers and Super and Insurance in Super.
“We intend to make public the results of our 2017 project work. Now is the time for trustees to consider whether their practices are in the best interests of members, as well as whether their members are adequately informed of decisions affecting them,” ASIC deputy chair Peter Kell 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.