Superannuation trustees urged to improve insurance outcomes for members
A review from ASIC has highlighted areas where trustees need to improve, including life insurance provided to members.
In 2022, the Australian Securities and Investments Commission (ASIC) undertook a review to examine actions taken by a sample of 15 superannuation trustees to enhance their life insurance arrangements. The review examined whether trustees had made progress in addressing the issues raised by ASIC in various public communications since 2019 and were meeting new regulatory obligations. The findings are outlined in Report 760 Insurance in superannuation: Industry progress on delivering better outcomes for members (REP 760).
ASIC’s review found many trustees have made changes to the design of their insurance arrangements to better meet member needs and provide value for money, such as by changing restrictive ‘total and permanent disability’ definitions.
It also revealed that many trustees have worked with their insurers to streamline their claims processes to make them easier for members to navigate and taken steps to enhance their oversight of insurers’ claims handling practices.
Additionally, some trustees have improved the way they explain their insurance offerings to make it easier for members to understand their insurance and make appropriate decisions for their circumstances.
However, the trustees have not made sufficient effort in all areas.
“Insurance in superannuation provides a built-in safety net for millions of Australians,” ASIC commissioner Danielle Press said.
“Superannuation trustees play a central role in deciding what life insurance is made available to their members and how it is provided.
“Whether it is default or optional insurance, we want fund members to have confidence that they are receiving value for the insurance they hold through their super and that they will be able to claim on it when they need to.”
“Trustees are well placed to identify and prevent harms such as members paying for insurance they cannot claim on when they need to. They decide how insurance in superannuation is designed and delivered to their members. However, while the trustees in our review have shown some progress with their insurance arrangements, progress is not necessarily consistent across the industry.”
ASIC has written individually to the trustees involved in the review to provide detailed feedback, including where improvements are required. REP 760 also recommends key actions for all trustees when making improvements to their insurance arrangements.
“I strongly encourage all trustees to commit to a thorough analysis of their insurance arrangements using the information and action points in ASIC’s report to identify where they fall short and address any gaps. Life insurers also need to play their part by working collaboratively with trustees to implement any improvements,” Ms Press said.
“Trustees, in particular, need to ensure they have robust systems, processes and controls to effectively administer their insurance arrangements. Trustees that fail to do this risk undermining any improvements they are trying to make for their members’ benefit.
“We expect all trustee boards to engage with the report, learn from it, and take action to make improvements to ensure strong member outcomes. Where appropriate, ASIC will use its regulatory powers where trustees are not complying with their obligations.”