September 7, 2018
The current voluntary code of practice covering life insurance inside superannuation is too weak at present to be effective and should be made mandatory for all superannuation trustees, according to ASIC.
The regulator made the comment as part of a report which examined the provision of life insurance cover through superannuation and found that many trustees had poor complaints-handling timeframes and practices, as well as a very high level of variation in the TPD definitions used in the insurance products offered through superannuation funds.
ASIC stated the voluntary Insurance in Super Working Group (ISWG) Code of Practice could raise standards and improve the complaints process but “…this requires broad industry commitment and effective monitoring and enforcement arrangements”.
“At present, there are significant weaknesses in the Code, including in its monitoring and enforcement arrangements, that limit its potential effectiveness,” ASIC noted, adding, “Industry codes work best if they have full coverage across the industry. One way to achieve this is to make Code membership mandatory”.
“…there are significant weaknesses in the Code…that limit its potential effectiveness”
In the area of complaints handling, the regulator found that 32 per cent of trustees took more than 90 days to deal with a complaint during 2017-2018 while a further 36 per cent took from 45 to 90 days to do the same. The Code of Practice requires trustees to provide final response to member complaints within 45 calendar days.
Commenting on the review of 47 superannuation trustees released in Report 591 Insurance in Superannuation, ASIC Deputy Chair, Peter Kell, said that despite some improvements being introduced by trustees, there was still much work to do to raise standards in the areas covered by the review.
“In the coming months, ASIC will be focused on ensuring that members do not experience adverse outcomes arising from poor complaints handling or inappropriate defaults. It is essential that trustees meet their obligations to deal with consumer complaints about superannuation in a timely manner and provide reasons for decisions as required,’ Kell said.
Additionally, ASIC would seek to develop stronger internal dispute resolution requirements for superannuation funds after the Australian Financial Complaints Authority commences operations in November.