The Australian Securities & Investments Commission (ASIC) has urged superannuation trustees to focus on improving life insurance outcomes for their members.
ASIC Commissioner Danielle Press emphasised that superannuation trustees play a major role in deciding what life insurance is available to their members and how it is provided.
“Insurance in superannuation provides a built-in safety net for millions of Australians,” Press said. “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,” Press said. “However, while the trustees in our review have shown some progress with their insurance arrangements, progress is not necessarily consistent across the industry.”
In 2022, ASIC examined actions taken by a sample of 15 superannuation trustees to improve their life insurance arrangements.
During the review, the regulator checked if the trustees addressed the issues it raised in various public communications since 2019 and met new regulatory obligations. The review found the following:
However, ASIC claimed the trustees have not made sufficient effort in all areas.
ASIC wrote to each trustee involved in the review to provide detailed feedback, including specific improvement areas.
“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,” 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.”
ASIC will “use its regulatory powers where trustees are not complying with their obligations”, Press said.
ASIC's reminder follows the Life Code Compliance Committee's (LCCC) report showing that complaints against life insurance providers dramatically increased in 2021-22.