ASIC warns super funds on insurance messaging

It is not appropriate for superannuation fund trustees to encourage all members to maintain insurance in circumstances where many members with inactive accounts will be better off allowing the insurance to lapse, according to the Australian Securities and Investments Commission (ASIC).

ASIC commissioner and former industry superannuation fund chief executive, Danielle Press delivered the message as part of ASIC’s guidance around how superannuation funds should deal with the Government’s recently enacted Protecting Your Super Package legislative changes.

Press said that, similarly, trustees should not be urging all members with low-balance accounts to keep their account within the fund as this may not be in the best interests of members.

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The warning is significant because it comes at a time when a number of superannuation funds have been developing communications strategies, which it part warn members about what is at risk if they fail to opt-in to insurance inside superannuation.

What is more, Press put superannuation funds on notice that ASIC would be closely monitoring communications around the legislative changes and was ready to take action if it believed members were being misled.

“How a trustee communicates with their members about the PYSP changes will give us an indication of the trustee’s commitment to members’ best interests,” she said.

ASIC yesterday pointed out the changes contained in the Protecting Your Super Package legislation including:

  • Insurance will be opt-in for members whose accounts have been inactive for 16 months.
  • Fund members with balances under $6,000 whose accounts have been inactive for 16 months will have their accounts paid to the Australian Tax Office (ATO). The ATO will take proactive steps to consolidate this with the members’ active super fund.
  • Fee caps will be imposed on certain fees for account balances under $6,000.
  • Exit fees will not be charged for moving money from a superannuation account.

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yet again proof ASIC have no clue. Insurers need to collate stories and ata around super members who suffered health issues or accidents, and yet the one saving grace was their neglected insurances inside their super. Wake up ASIC, it is time you become a professional organisation that conducted the due diligence and correct background research before making insane policy statements via media release. Are your fragile egos so battered from the RC that you have now become a media whore?

I reckon the way forward for ALL retail funds is this.
1) Simplify all offerings into ONE single simple fund (that ASIC think it understands) with a MySuper option.
2) Call the MySuper Option "Balanced". Very important as ASIC and APRA will never look beyond this.
3) Move asset allocation to 98% growth - with some venture capital and everything. Don't worry, APRA has no clue.
4) Unlist ALL property/infrastructure. Can start with current market price and unit price of 1.00. Many advantages, can increase valuations of this part of the portfolio without that annoying market value staff. Industry Fund are likely already overvalued their unlisted assets so just push the valuations up and up.
5) Slug all members with Insurance - and get a deal with the insurance company for some profit share.
6) Use part of your admin fee to pay staff (just don't call it a commission). Have the staff work directly for the trustee and DO NOT LET THEN HAVE AN OPTION TO DISCUSS ANOTHER SUPER PROVIDER. That has been a big mistake.
7) Hire a heap of staff with sales training and get going with GENERAL ADVICE.
8) Important step this - spend up big on advertising in the media. It's not about the coverage - what media outlet will bit the hand that feeds it?
9) Step nine is the most important step of them all - watch the FUM roll in while you buy ASIC a drink at the tennis.

Hi Anonymous, I am the chairman of a large well known industry super fund. You have some really great ideas there. I'd like to speak to you about becoming the CEO of our fund! When can we catch up?

Danielle Press creating more work for Robo Advice Six Pack?

I think that all superfund trustees who think they can operate legitimately under these controls should examine their own PI insurances. Surely all claims that have occurred and that arise from now on as potential claims, should be referred to the trustees of each fund ?

A disaster in the making.

Does Danielle Press want to front up to the parents of a totally and permanently disabled son or daughter and tell them that because they had a super balance of only $5000 and hadn't made any contributions for the last 18 months, the Income Protection Insurance benefit and the $150,000 of TPD cover had been cancelled and the $5000 account balance is all they have left to deal with the financial impact of care ??
This is an utter mess and who will be responsible for these outcomes....because they will happen soon.

I think many insurers will actually be delighted with ASIC's guidance. Insurers were probably dreading fronting up to court for the sort of situations you described, and trying to defend themselves against allegations of not having done enough to warn clients of the consequences of inaction. Now, thanks to ASIC, they have the perfect defence.

Exactly right!

I don't understand the need for the short time frame around this legislation. Super funds are notifying people now and if they don't respond, the insurance will be cancelled on the 1st July.....what if someone is on holiday for a few months? what if that single letter doesn't make it to their letterbox? this legislation is awful but seeing as we're stuck with it, why don't they just extend the deadline until the end of the calendar year, what would be the harm in that? The harm caused by potentially thousands of people losing cover because they didn't receive a letter or didn't understand the letter they did receive is surely worse then another 6 months of default insurance premiums coming out.

Is it not in the members best interest for the Trustee to warn the member of the consequences if they do not Opt In as well as notify them of the consequences if they do elect to Opt In ????
What is Danielle Press trying to say here??....that its ok to only provide one side of the story, otherwise it could be seen as coercion or influence ??....................this is out of control and is appearing to seem there is a hidden agenda.

I have a client with MS is only 43 and had 3 lost supers all with TPD cover we are currently in the process of claiming for this client I just called and they have been sent letters to cancel this cover. So we are trying to ensure that they have been ticket to keep this cover I wonder how many clients cover will be cancelled because they missed the letter/ email etc and can't claim that cover.

Not to mention all the clients that have left money in older super accounts to pay for insurance which they cannot get anymore due to health reasons.

a better approach to this would have been a letter to opt out of the insurance if they wanted to or something highlighting the cost and offer if they still need it not the other way around and you have 2 months to tell the fund seems crazy there will be so many people that don't realize

The most bizarre thing about the time frame is that this is not a once off thing. Super funds need to track this for every member into the future and are required to provide warnings to members if their account hasn't had a contribution for 6, 9 and 12 months and then again before they cancel the cover. So why do we have a 2 month time frame with one warning at the onset of the legislation but in the future people will receive 4 warnings over a 10 month period. Makes no sense whatsoever.

think about Binding nominations and all the issues of when we only had the option of having lapsing nominations and this lead to estate planning issues due to the nominations lapsing. Then they introduce non lapsing nominations to fix the issue. this new rule is going to cause so many problems

As per usual this is an idea bubble without adequate consideration of potential and unintended consequences.
There appears to be an unhealthy obsession as to how much the insurance is costing the member without any consideration as to the potential financial benefit of having the insurance in place.
This will result in a superannuation member dying or becoming disabled and then having a claim lodged with the fund only to learn that the insurance cover was taken away from them (in their best interest !!!).
When they can guarantee every effected member they wont die or become disabled and therefore there is no need for the insurance cover, then they can proceed with this shortsighted and negligent practice.
Until then, leave it alone, reduce the cost of seeking advice and allow the advisers to to do the advising.

nice idea mate but Danielle Press thinks robo advice is the future is a board of directors not sure how this isn't a conflict of interest.

This rule is a nightmare we have to go and check all clients with hold insurance recommendations are not going to be affected by the change eg balances getting transferred to the ATO which had enough to keep 5 years worth of premiums but no longer meets these requirements which the client might lose this cover now. We normal have to get new authority forms signed and applied because the super fund has an internal rule they wont except an old authority form even if we had a valid authority form bloody twats.

these guys have no idea how advice in the real world works.

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