Following the release of its report into direct life insurance (see our blog entry on that here), ASIC has also released a report on the provision of insurance cover through superannuation (Report 591). Generally, superannuation funds offer their members one or more types of life insurance (such as life cover, TPD cover and income protection cover). 70% of all life insurance policies in Australia are held through superannuation funds.
ASIC’s review of 47 superannuation trustees focused on the following:
- Insurance claims and complaints handling.
- Disclosures about insurance (including about cover ceasing).
- Insurer rebates paid to trustees.
- Whether members were defaulted into demographic categories that resulted in higher premiums.
ASIC identified the following issues of concern resulting from its review:
- Poor complaints-handling timeframes and practices, as almost a third of trustees reviewed took more than 90 days on average to resolve insurance complaints in 2017-2018.
- Some trustees automatically default members as ‘smokers’ when transferring them to different sections of the same fund, resulting in those members paying a higher insurance premium.
In the coming months, ASIC will be focusing on ensuring members do not experience adverse outcomes arising from poor complaints or inappropriate defaults. ASIC will be consulting on stronger internal dispute resolution requirements for superannuation after the Australian Financial Complaints Authority commences operations in November.
The release of Report 591 follows heightened regulatory focus on the life insurance industry and the provision of insurance through superannuation.
Further information can be found here.