On 18 December 2017, the Insurance in Superannuation Working Group (ISWG) released the “Insurance in Superannuation Voluntary Code of Practice” (the Code) for superannuation trustees. The ISWG is comprised of Australia’s superannuation bodies, the Australian Institute of Superannuation Trustees (AIST), the Association of Superannuation Funds of Australia (ASFA) and the Financial Services Council (FSC). The group also includes representative life insurers, superannuation funds and consumer advocates. The group advocates in favour of group insurance in superannuation.
The release of the Code is timely given the focus by APRA and the forthcoming Royal Commission on insurance in superannuation. The Code aims to provide greater understanding, accountability and consistency of delivery across the superannuation industry. It comes into effect from 1 July 2018.
Although the Code is voluntary, ASFA has today reported that the ISWG expects to receive strong support from trustees. The aim of the Code is to enhance member interests and to help build confidence in understanding life insurance through superannuation. According to the joint media release issued today, the Code includes:
“1. A framework that sets expectations about the maximum amount of superannuation contributions that should be used for automatically provided life insurance premiums.
2. Simpler and clearer processes for members to opt out of automatic life insurance.
3. Simplified disclosure and improved superannuation fund member communications about insurance.
4. Requirements to reduce multiple insurance policies by cancellation of some insurance cover, after funds contact members, in cases where member accounts are inactive and insurance exists.
5. Provision of better and more timely assistance to members during claims.
6. Standards for handling of premium adjustment amounts between insurers and trustees.
7. Requirements for trustees to publish plans for the Code’s implementation and when various aspects of it will be implemented.”
APRA is proposing to amend SPS 250 Insurance in Superannuation to require RSE licensees to provide simple processes for opting out of all insurance products and to align with the Government’s expectations that fund members should be able to make and implement decisions about their insurance cover in a straightforward manner. The consultation period closes on 29 March 2018 with a projected release date of mid 2018.
On 13 December 2017 APRA released a Discussion Paper on “Strenthening superannuation member outcomes” together with proposed Prudential Standards and Practice Guides designed to ensure that superannuation trustees can respond effectively to strategic and operational challenges. These drafts are SPS 220 Risk Management , SPS 225 Outcomes Management, SPG 221 Strategic and Business Planning and SPG 225 Outcomes Assessment. The proposals are designed to ensure that RSE licensees meet their obligations under the Superannuation Industry (Supervision) Act 1993 (SIS Act).
Please contact Catherine Osborne, Consultant at Meridian Lawyers, if you wish to discuss these developments.