The Australian Securities and Investments Commission (ASIC) has released REP 591 Insurance in superannuation. The report sets out the findings from ASIC’s review of issues relevant to the consumer experience of insurance provided through superannuation.
Based on previous findings that the consumer experience of insurance in superannuation is not always positive, ASIC requested information from 47 superannuation trustees across the retail, industry and corporate sectors for the 2015–16 financial year.
ASIC then selected 18 (of the original 47) trustees for a more detailed review of their insurance arrangements.
The review focused on:
- insurance claims and complaints handling,
- disclosures about insurance (including about cover ceasing),
- insurer rebates paid to trustees, and
- whether members defaulted into demographic categories that resulted in higher premiums.
Findings of concern included:
- poor complaints-handling timeframes and practices, as almost a third of trustees in the review, took more than 90 days on average to resolve complaints about insurance in 2017-2018;
- some trustees were still automatically defaulting members as ‘smokers’ when transferring them to different sections of the same fund, resulting in higher insurance premiums payable by those members. All trustees have agreed to discontinue this practice.
The Insurance in Superannuation Report sets out actions trustees should take to achieve better outcomes for members who acquire life insurance coverage through their superannuation funds:
Insurance claims handling: In order to realise benefits from insurance cover, claims handling processes must be clearly explained and easy to navigate.
Complaints handling: Trustees must give written reasons to members and others for all complaints about death benefit claims or on request for other types of complaints.
Dealing with complaints within the required timeframes: Trustees currently have a legislative requirement to properly consider and deal with superannuation complaints and inquiries within 90 days. ASIC’s priority is to see that those trustees with averages over 100 days have reduced their complaints handling timeframes.
Insurance cover disclosure: Superannuation members need timely, accurate and consumer-focused information to be able to make informed decisions about the insurance products offered by trustees.
Conflicts: Trustees should be transparent about any rebates or benefits received from insurers and how receipt of these is consistent with acting in the best interests of members.
Default transfer arrangements: Trustees should avoid applying defaults classifying members as smokers or blue-collar workers in the absence of other information about a member or group of members.
ASIC will be consulting on stronger internal dispute resolution requirements for superannuation after the Australian Financial Complaints Authority commences operations in November 2018.