Earlier this week, the Australian Prudential Regulation Authority (APRA) proposed changes to their prudential standard for superannuation insurance.
The changes come one week after the prudential regulator published an information paper intended to lift the standards in governance, culture, remuneration and accountability (GCRA).
Earlier this year, APRA Deputy Chair, Helen Rowell, called on the superannuation industry not to wait until the introduction of the legislation to follow the recommendations that came out of the Hayne Royal Commission.
“Commissioner Hayne identified areas where APRA must clearly do better—especially in relation to ensuring trustees are held to account for failing to meet their obligations to members,” Rowell said then.
Superannuation insurance was critical issue in the media spotlight even before the Royal Commission into the financial services’ sector was announced.
This week saw the release of the Prudential Standard SPS 250 Insurance in Superannuation consultation, which will close early next year in February. The basis for the prudential practice guide will be the feedback resulting from the consultation.
According to an official statement from APRA, the proposed revisions include:
a process that enables beneficiaries to easily opt-out of insurance cover;
that the level and type of insurance cover not inappropriately erode the retirement income of beneficiaries;
that any status attributed to a beneficiary in connection with the provision of insurance is fair and reasonable (Royal Commission Recommendation 4.15); and
independent certification that insurance arrangements are in the best interests of beneficiaries (Royal Commission Recommendation 4.14).
Opening the Black Box
In 2017, the GRC Professional Magazine spoke to the CEO of the Financial Services Council (FSC), Sally Loane. At the time, the FSC was launching their Code of Practice that related to the Life Insurance Industry and were looking to extend that Code to impact those with life insurance in their superannuation.
At the same time, the Government was coming down hard on the superannuation industry for failing to be more proactive about informing their members that they did have life insurance in their superannuation.
This issue of communication with members and the ability to opt in and/or opt out was addressed in a letter that accompanied the release of the APRA consultation, earlier this week:
In addition, APRA has proposed two further changes to SPS 250 in relation to the ease of opting out of insurance cover and the cost of insurance not inappropriately eroding the retirement income of beneficiaries. The latter re-emphasises the existing SIS Act requirement in response to APRA’s concern that some RSE licensees have not been giving adequate consideration to it. Processes for making the opt-out of insurance easier has also been identified as an area where improvement in practices by some RSE licensees are needed.