The Australian Prudential Regulation Authority (APRA) is seeking industry feedback on its proposed revisions to the Prudential Standard SPS 250 Insurance in Superannuation (SPS 250) and Prudential Practice Guide SPG 250 Insurance in Superannuation (SPG 250).
In a letter to the industry, APRA explained that the revisions to the superannuation prudential framework are crucial to ensure that RSE licensees meet their obligations to select, monitor, and manage insurers prudently.
The amendments are consistent with the focus of the new best financial interest duty and the reverse evidential burden of proof recently implemented as part of the government's Your Future, Your Super reforms. In addition, RSE licensees must maintain sound insurance management frameworks and robust decision-making in the negotiation and ongoing review of insurance arrangements.
On January 20, 2021, APRA released a consultation on a revised draft of SPS 250 and SPG 250 – both created to address two recommendations from the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry:
- The independent certification of related party insurance arrangements and priority and privilege arrangements; and
- To ensure the rules for status attribution for a beneficiary are fair and reasonable.
Additional proposed changes reflect the recommendations by the government for trustees to facilitate easy opt-out of insurance by superannuation members, and to ensure that premiums do not inappropriately erode members' retirement income.
APRA is finalising the amendments to SPS 250 and SPG 250 and intends to issue the final standard and guidance in the coming months. The revised SPS 250 is set to commence from July 01, 2022.