The Insurance in Superannuation Working Group (ISWG) has released the Insurance in Superannuation Voluntary Code of Practice for superannuation trustees, that has attracted criticism from consumer groups and the government.
The Code, targeted to take effect from 1 July 2018, is a first for the industry and sets standards that will provide greater understanding, clearer accountability and consistency of delivery across the superannuation industry, says the ISWG. The Code is voluntary and ISWG expects there will be strong support for trustees to sign up to it.
Included in the Code are:
- A framework that sets expectations about the maximum amount of superannuation contributions that should be used for automatically provided life insurance premiums
- Simpler and clearer processes for members to opt out of automatic life insurance
- Simplified disclosure and improved superannuation fund member communications about insurance
- Requirements to reduce multiple insurance policies by cancellation of some insurance cover, after funds contact members, in cases where member accounts are inactive and insurance exists
- Provision of better and more timely assistance to members during claims
- Standards for handling of premium adjustment amounts between insurers and trustees
- Requirements for trustees to publish plans for the Code implementation and when various aspects of it will be implemented.
The ISWG, formed in November 2016, is comprised of Australia’s superannuation bodies, the Australian Institute of Superannuation Trustees (AIST), the Association of Superannuation Funds of Australia (ASFA) and the Financial Services Council (FSC), which share the common belief that group insurance in superannuation is fundamentally the right policy setting for millions of Australians. About 70% of Australians receive life insurance through superannuation, where it is provided on an opt-out basis.
Code seen as diluted
However, Financial Services Minister Kelly O'Dwyer slammed the voluntary code as being watered down and unenforceable.
She said: "The Government is concerned that the superannuation industry has walked away from a commitment to a more robust, mandatory code of practice that had been the subject of earlier consultation."
"The Government will consider an appropriate regulatory response in light of the industry's position."
Mr Xavier O'Halloran, policy advisor of consumer group Choice, told ABC News that self-interest from insurers about potentially losing some of their revenue from premiums saw the Code watered down from a tougher draft code released earlier this year.
For example, a key proposal of the earlier draft Code that there be an "independent Code administrator" which was to have powers to investigate breaches of the code and have powers to sanction funds if these breaches were not remedied, is now absent.
"After a year of working with consumer groups and others, the industry has delivered a dud code," Mr O'Halloran said.
The final Code is in its current form reportedly after the Law Council of Australia's superannuation committee warned that the draft Code would not be enforceable because it was at odds with super trustee laws aimed at ensuring funds act in the best interests of members.