ASIC places super funds on notice over insurance

The Australian Securities and Investments Commission (ASIC) has placed superannuation funds on notice to be careful in their member communications around the Government’s new Putting Members Interests First legislation which will make insurance inside superannuation opt-in for low-balance members.

The regulator has suggested that superannuation funds need to tell members when opting out of insurance might be in their best interests.

The message is contained in a letter written by ASIC to superannuation funds this week.

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The regulator has claimed that a review it conducted of superannuation fund communications around the Government’s early Protecting Your Superannuation Package (PSYP) reforms were not always balanced in providing members with all available options open to them, including the reason why ceasing insurance might be appropriate.

“ASIC expects trustees to follow ASIC’s guidance, based on its initial review of the PYSP communications, in designing their communications from now on. Communication with members about important matters, such as their insurance, should not be dismissed as a ‘mere exercise in compliance.’ Trustees need to act to help their members understand what the reform means for the member,” it said.

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Ummm, that would constitute advice...

Surely for a super fund to give advice to a member regarding their insurances within that fund it would be considered as ADVICE. Where is the Statement of Advice discussion, where are the multitude of checklists, file notes and other compliance documents. The regulators have double standards, they have no real idea how their laws have such far reaching consequences across the entire industry.

And how exactly is the provider of a product supposed to determine whether something is in the clients' best interests or not?

I'm surprised that ASIC didn't insist that members be referred onto a financial adviser to obtain personal advice relevant to their circumstances. Are they really on the side of the members or not?

That will do me! The Trustee is not competent to form a view as to the appropriateness or otherwise of the members insurance needs in the absence of carrying out a full analysis of the member's status and even then it would require consultation with the member. EG: 1. 22 year old with 2 children and a $500K Mortgage --how would the trustee know that 2. a young man with ostensibly no encumbrances has their ageing mother and father reliant on their child's income -- how would the Trustee know that????

If this is not the most absurd ASIC edict it must get into the finals.

Why would the Trustee attract a liability in damages, thereby affecting the interests of all other fund members by expressing a view to just one of it members that insurance is not in the members best interest.

Are ASIC on another planet? They constantly try to regulate to the lowest common denominator. All it does it create further complexity and increases costs for everyone.

How is the super fund supposed to know what is in the interest of members?'s time you stop thinking you are the GODS of all things financial and start being realistic.

Absolute gold...Dear member, You would be better off cancelling your insurance cover and saving the premiums into your super fund for your retirement...unless you intend to claim on the insurance cover. Please tick the appropriate box below...a) Im young and bullet proof and have no intentiion of claiming or b) I intend on claiming on my insurance cover in the next 5 years or c) It wont be for another 10 years that I will claim so I would like to cancel my cover until I am sick or injured.

This is a now a very clear demonstration of how completely out of touch and bizarre ASIC's power trip has become.
You literally could not make this up if you tried.
They have just pummeled Westpac in relation to providing general advice when they say it was personal advice and now they turn around and insist the super fund itself should assess a member's best interest position when the super fund knows nothing of the member's personal circumstances whatsoever.....this is simply crazy.
The Protecting Your Super "reforms" were a disaster.
If they was any sense of intelligence around this space, they would have made it an Opt Out process and NOT an Opt In process.
Write to the member several times and let them know on multiple occasions how much insurance they have and the associated cost etc.
Then the member could voluntarily assess the information and elect to either retain or cancel their insurance cover.
However, now we have a situation where tens of thousands of members have inadvertently lost their insurance cover as a result of not responding within the prescribed time frame.
So, is it in the best interest of a member for legislation and reforms to be enforced that will automatically remove a valuable benefit from their super account due to no authority being provided or is it much better for an authority to be received directly from the member instructing the removal of the insurance cover ???
When Bill Kelty recently blasted the Govt about continually messing with superannuation, he was 100% correct.
When ASIC claim that communications were not balanced, what they really mean is that
"we want the low balance accounts to not have any insurance cover attached and you should have provided more subliminal coercion wording to encourage this outcome.".
Is it in the best interest of a member to lose their insurance cover through no response when they have a major accident or illness 3 weeks after it is cancelled.
If an adviser recommended this, they would be hung by ASIC.
Just plain ridiculous.

Sorry, but I'm speechless with the continual 'dribble' that keeps being released from the numerous regulators involved in our industry. Opting out of insurance might be in a members best interest from a cost perspective where they don't have a current need. Is the average person able to determine what their needs are ? Oh, and lets say that the cost perspective argument is justifiable, where would the trustees stand where a members circumstances changed with them then having a need for insurance which they couldn't then purchase due to health issues. How long is a piece of string ? It can go both ways. At this point I'm beginning to wonder which way is up with all of this stuff. Very frustrating and sad to see this continual be-lava being thrown around. Capitulation of the industry as we know it is on the radar unless we can get some clear leadership (involving consultation) at the top.

Since when has it been assumed that because someone has $5000 sitting in a super account and the Death and TPD Insurance cover of $350,000 each is not important or not in the best interest of that member because it is costs $250 a year to have it there ??????
If that person dies or becomes disabled, $350,000 will walk in the door and may financially save a family or individual.
If they don't have the insurance cover, $5000 walks in the door.
Which one of these is in the member's best interest ASIC ???

The average super fund must be pretty stupid.. but then again so is ASIC

Is there a chance the FSC is pushing ASIC down this path? Insurers are under the pump with no win no fee lawyers and TPD claims - better to have less of these pesky little cheap policies around where the owners might get hurt because they are often workers who then seek legal advice.

ASIC has simply lost the plot. Get them out of here NOW.

Look on the bright side. The clowns at ASIC with their red noses, big red floppy shoes, and little red book only have to regulate the communication for the measure.
For the other bits, APRA does the life insurance and the ATO the inactive low-balance accounts.
I'm sure FASEA and TPB are trying to find ground in here somewhere as part of the regulators' civil war that was started by the Royal Commission.
Bring on the reforms that were hinted at by the Government leading up to the 2013 Federal Election. Mind you, that's probably why they have set the regulators up against each other to justify the restructure.

I think the gist of ASIC's comment is the trustees must explain when it might be in the best interest to cancel insurance. I would be fascinated to see what would be seen to be appropriate. I expect it will be an oversimplified example or an over complicated one. Good luck outlining that concisely. Probably the explanation should be: it maybe in your best interest to cancel your life insurance held within your super account if you have recently seen a qualified Financial Planner and they specifically provided advice to do so. Otherwise the explanation is most probably going to be very lengthy and won't be read anyway.

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