Super fund trustees should do more to optimise the benefits their members receive from the insurance they carry via their superannuation accounts according to an ASIC review.
The commission’s review found many trustees had revised their insurance arrangements to better meet member needs and provide value for money, such as by changing restrictive ‘total and permanent disability’ definitions in instance claims.
ASIC also noted that while some trustees had improved how they explained their insurance offerings to make it easier for members to understand their insurance and make appropriate decisions for their circumstances.
However, the regulator also noted that trustees had not made sufficient effort in all areas, adding it had written individually to the trustees involved in the review to provide detailed feedback, including specific areas where improvements were required.
“Insurance in superannuation provides a built-in safety net for millions of Australians,” ASIC Commissioner Danielle Press said. “Superannuation trustees play a central role in deciding what life insurance is made available to their members and how it is provided.”
“They decide how insurance in superannuation is designed and delivered to their members. However, while the trustees in our review have shown some progress with their insurance arrangements, progress is not necessarily consistent across the industry,” Press said.
In 2022, ASIC undertook a review to examine actions taken by a sample of 15 superannuation trustees to enhance their life insurance arrangements. The review looked at whether trustees had made progress in addressing the issues raised by ASIC in various public communications since 2019 and were meeting new regulatory obligations.
For the review, ASIC selected 15 superannuation trustees that provided death cover and TPD cover to approximately three million members, and IP cover to approximately 800,000 members as at June 2022.
They included large and small industry, retail, and corporate funds to cover a cross section of the industry.
ASIC is not the only entity that has seen shortcomings in the administration of insurance claims.
AFCA tells Investment Magazine the organisation had seen an increase in complaints about delays in the handling of claims for insured superannuation benefits.
“There are many reasons management of a claim may exceed standard timeframes. However, we see some cases where trustees could have done more to maintain oversight of the insurer’s handling of the claim, and to expedite the process,” lead ombudsman for superannuation Heather Gray says.
“We also see cases where the claimant has been unsure about the steps to be followed and would have benefited from greater support from the trustee or insurer to lodge and pursue their claim.”