The terms of the Insurance within Superannuation code of practice has confirmed its voluntary status with respect to the participation of superannuation fund trustees and that it will not apply if superannuation fund members pursue action in the courts.
The final code of practice developed by the so-called Insurance inside Super Working Group was released yesterday, with the document confirming that while superannuation funds will be signing up to that code, the life/risk insurers will be adhering to a different code – that formulated by the Financial Services Council (FSC).
What is more, the terms of the code make it clear that it is subservient to not only the laws and regulations governing the superannuation industry but also the trust deeds of the superannuation funds themselves.
At least two legal firms lamented the lack of enforceability around the code, with Maurice Blackburn Principal Josh Mennen describing the code released yesterday as a missed opportunity to deliver enforceable and binding change.
"Everyone from consumers through to the Federal Government have made clear that they expected this process to deliver a binding code that would reform the industry, but that is not what the ISWG has delivered,” he said.
Berrill Watson lawyers principal, John Berrill said the removal of external oversight by a Code Administrator was very disappointing and that self-reporting of code breaches was a flawed model.
“It requires those funds who may flaunt the Code to admit to it, which is unlikely. All codes of practice in financial services have Code Compliance Committees which audit, name and shame, and potentially expel members who breach the code,” he said.
The preamble to the code of conduct makes clear that where any inconsistency exists between the code and any law or regulation, that law or regulation will prevail.
The limitations inherent in the status of the code are spelled out in the paragraph which states: “We have a legal requirement to perform our duties and exercise our powers in the best interests of our beneficiaries. We will comply with our commitments in the Code to the extent that they are in the best interests of beneficiaries and consistent with our other legal duties”.
It then added. “However, we cannot comply with anything in the Code that limits our ability to comply with our statutory and general law duties, and our trust deed.”
The document then suggested that this might mean that superannuation funds would need to alter their commitments to the code and this was something that might require super funds to alter their commitments to the code and notify members via an annual Code compliance report.
The preamble said that funds would “use our discretion when making decisions about the insurance benefits that we provide”.