In the wake of a damning investigation into the life insurance sector, the regulator has told superannuation trustees it expects them take a proactive approach to improving the group insurance sold via their funds.
Super fund boards should also expect to be tapped by the regulators for detailed information about the mandatory group death, disability, and income protection insurance policies they negotiate for members.
Fourteen funds have already received requests to provide more detail on their policy definitions, inclusions, their claims handling processes and denial rates.
Two senior Australian Securities and Investments Commission (ASIC) executives outlined the plans in a presentation to an Australian Institute of Superannuation Trustees (AIST) event in Melbourne on Tuesday.
Earlier this month ASIC, in collaboration with the Australian Prudential Regulation Authority (APRA), released a report highlighting some alarming trends in the life insurance sector.
The report found that one unnamed insurer had rejected roughly one third of all total permanent disability (TPD) claims.
While the regulators did not name the insurer but it has since been revealed to be Westpac’s life insurance arm BT Life. BT boss Brad Cooper has defended the insurer’s track record, blaming inconsistent reporting standards.
While the recent report focused on issues in life insurance sold directly and through advisers, the corporate and prudential regulators are already looking into the group policies that are a default component of super, ASIC senior manager investment managers and superannuation Alex Purvis said.
She welcomed a commitment by the sector to improve self-regulation.
Member attitudes ‘challenging’
In early October, the Financial Services Council (FSC) unveiled its new voluntary code of conduct for life insurers. This was one of the outcomes of the Trowbridge Review.
A few days later, and a few days before ASIC released its latest damning report into the industry, the AIST and four other peak bodies representing the non-profit super sector announced they were collaborating with the FSC to adapt its voluntary life insurance code to cover group policyholders.
The other super peak bodies that signed this statement of intention were Industry Super Australia, the Association of Superannuation Funds of Australia, and Industry Funds Forum.
AIST chief executive Tom Garcia told the gathering to expect an announcement “probably by the end of the week” on this initiative.
Last week, Investment Magazine editorialised that all trustees should review the governance around group insurance at their fund, following the crackdown on life insurer standards.
ASIC group senior manager insurance Emma Curtis told the AIST forum on Tuesday that if they don’t, the regulator might push to extend incoming requirements on funds to reveal more details about their fees to include extra disclosures about insurance premiums.
Curtis acknowledged that a big challenge for super trustees is that member attitudes to the insurance policies they hold through their funds tend to be characterised by a “basic lack of awareness”, a “sometimes deep sense of mistrust”, and “most commonly inertia”.
She encouraged funds to take a “behavioural finance” approach to the way they designed their insurance offerings and communicated to members about them.
Recently it had been pleasing to see one fund halve the length of its claim form following a redesign to make it easier for members to complete, Curtis said.