ASIC’s findings and expectations have significant ramifications for the industry, whether or not you agree with them.
The report contains some interesting conclusions relating to insurance disclosures and claims including:
There are also some incidental findings relating to the adequacy of disclosures in product dashboards, the adequacy of disclosures about a third party being responsible for calculators made available from a fund’s website, giving too much prominence to group branding, ‘unbalanced’ disclosure about consolidating super accounts, and the absence of any strategy to deal with vulnerable consumers (eg. indigenous members). ASIC also encourages trustees to make insurance policies publicly available via the website.
Some of the insurance related findings are worrying because they ignore the nature of group life cover. For example, ASIC has an expectation that members are notified when their cover ‘is about to’ change or cease, when (usually) the trustee will not be aware that an individual’s cover is about to cease or change. Default classifications in the absence of member details is also a fundamental aspect of group life cover. ASIC’s expectations in this area seem to flow from an overarching premise that trustee disclosures and services should be better targeted to the needs of members, including through increased analysis of member data, a consideration of behavioural economics and re-considering whether there is too much reliance on employer data. ASIC states ‘The timing of disclosures and the use of effective prompts (e.g. reminders) can influence their effectiveness. Superannuation trustees should give greater consideration to the timing, context and method of their communications to members. Information design should be consumer centric and based on what the member needs to know’. Necessarily, however, we think such expectations must be considered having regard to particular circumstances (including applicable insurance arrangements) and what a trustee knows (or can reasonably find out).
We also have some concern with ASIC’s statement that: ‘It is also important for trustees to be clear about the factors affecting claims. Feedback ASIC has received suggests that some claims may be denied on the basis of non-disclosure of minor or unrelated mental illness. Trustees need to make it clear to members that this information must be disclosed.’ Section 47 of the Insurance Contracts Act limits the ability of an insurer to deny a claim on the basis of a pre-existing condition. It does not allow a claim to be denied for an unrelated condition (whether it was disclosed or not). In any event, Trustees do not need to make it clear to members that this information must be disclosed if they have automatic cover under a group life policy, which is commonly the case in super.
It appears that the findings have resulted in ASIC requesting improved disclosure from trustees involved in the projects and ASIC’s reviews. ASIC states ‘We now expect all trustees to review their disclosures to ensure consistency between their policies, PDSs and other disclosure material, and to provide adequate notification of changes to or cessation of cover. Further, we expect all trustees to immediately review their default arrangements in insurance, particularly where members are being transferred between fund divisions without consent. Defaulting members as ‘smokers’ or ‘blue collar workers’ in the absence of information about member status is inappropriate’. However, ASIC indicates it intends to take further action ‘where we consider consumers are being poorly treated in relation to their superannuation’.
ASIC will also be considering the findings further in two current projects examining ‘Insurance in Superannuation’ and ‘Employers and Superannuation’.To download the ASIC Report, click here.
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