By Lisa-Marie McKechnie, Partner, and Aryana Thurairasa, Lawyer
There has been a lot of change in the Financial Services industry over the past year and 2018 is shaping up to be a year of enhancements to, and critiquing of, existing regulations and legislation.
There are three key pieces of legislative reform/industry consultation which superannuation trustees should be aware of and are likely to require assistance with.
The Life Insurance Code of Practice (Code) was put in place as the life insurance industry’s commitment to mandatory customer service standards. It has been voluntarily developed by the life insurance industry through the Financial Services Council (FSC) to promote high standards of service to consumers, provide a benchmark of consistency within the industry, and establish a framework for professional behaviour and responsibilities that are all designed to protect consumers.
The Code reflects the life insurance industry’s response to the 2015 Trowbridge review and sets out the industry’s key commitments and obligations to customers on standards of practice, disclosure and principles of conduct for their life insurance services, such as being open, fair, honest and dealing with claims, complaints and requests for information in a timely manner. The Code is currently only binding on life insurance companies who were required to be compliant with the Code by 1 July 2017. All those life insurance companies who have agreed to be found by the Code are listed on the FSC Website.
The Code covers many aspects of a customer’s relationship with their insurer, from buying insurance to making a claim and providing options to those experiencing financial hardship or requiring additional support.
The Code is monitored by an independent committee (the Life Code Compliance Committee), to ensure effective compliance by life insurers. Insurers can be sanctioned if they do not correct breaches of the Code.
This Code will only apply to superannuation fund trustees who have chosen to adopt it by entering into a formal agreement with the FSC and the Life Code Compliance Committee to be so bound.
If the Trustee opts to adopt the Code then the changes imposed by the Code may require the Trustee to update existing policy documentation, including the Insurance Management Framework Strategy as well as the Claims Philosophy, to ensure compliance with the Code.
The Code has attracted criticism for not automatically applying to superannuation trustees, a perceived gap which is sought to be remedied by the development of the Voluntary Code.
The Insurance in Superannuation Working Group (ISWG) released the Insurance in Superannuation Voluntary Code of Practice (Voluntary Code) for superannuation trustees on Monday 18 December 2017. The Voluntary Code will come into effect from 1 July 2018 and superannuation trustees need to consider whether they will adopt the Code by 31 March 2018.
The joint media release issued by ASFA and the ISWG states that the Code includes:
If a superannuation trustee chooses to adopt the Voluntary Code, there is a three-year lead time for compliance. For those funds with automatic or default cover, the implications for administration, premiums and disclosure are broad reaching. Superannuation trustees will see an impact in the following key areas:
On 13 December 2017, APRA released its consultation package in respect of steps it intends to take to strengthen ‘the key requirements and expectations applying to RSE licensees in important strategic and operational areas’ which are ‘expected to facilitate RSE licensees being able to demonstrate that they meet their obligations under the Superannuation Industry (Supervision) Act 1993.’
APRA’s consultation package comprises the following documents (but further changes are likely to be forthcoming):
The Discussion Paper details APRA’s proposals to:
APRA’s proposals will impact member outcomes requirements, superannuation reporting requirements and insurance opt-out requirements.
The consultation period for this package closes on 29 March 2018 and APRA is proposing that final APRA Prudential Standards will be released in mid-2018, coming into effect from 1 January 2019. APRA also intends to convene discussion about the proposals with interested parties during this consultation period. Expression of interest to discuss should be initiated as soon as possible. In finalising the requirements, APRA will consider both the feedback provided during consultation and the progress of relevant measures in the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.1) Bill 2017.
These changes are expansive and will require superannuation trustees to invest considerable time and resources in order to understand the ramifications, consider whether to adopt the codes and ask themselves whether there is a need to provide APRA and the ISWG with pragmatic feedback in response to these changes.
Please contact us should you require our assistance considering and/or implementing these important changes.
Please keep an eye out for further articles on each reform as updates are released from the relevant bodies.
For further information, please do not hesitate to contact:
Aryana Thurairasa | Lawyer