ASIC has today released a report about our review of key aspects of consumer engagement with their super funds, focusing on the experience of less-engaged superannuation fund members.
The review sets out key principles that can help improve member experience of superannuation. It also points to some areas for improvement, including in relation to the provision of insurance through superannuation funds and disclosure practices.
ASIC's review mapped three stages of the superannuation lifecycle:
- Joining a fund
- Participating in a fund
- Changing or leaving a fund
In examining these three stages, the review looked at potential risks or problem areas for consumers, and assessed how these were being managed by funds. This included examining where changes occur to a member's arrangements without consent, such as variations to insurance policies.
Some of ASIC's concerns related to poor disclosure where members' insurance cover has ceased or changed without adequate forewarning by the superannuation trustee.
ASIC expects superannuation trustees to take a consumer-focused approach and make their disclosures as effective as possible. It is not enough for trustees to mention circumstances in which cover might change upfront, as disengaged members will almost certainly not recall that possibility many years later.
ASIC also found that some trustees may be using inappropriate defaults in dealing with their members. In some cases, where trustees have moved members within a fund, trustees are treating members as "smokers" for the purposes of calculating their insurance premiums without knowing whether the member smokes or not. This can result in a higher premium for the member, which would be inappropriate given the low and decreasing levels of smoking among members of the public.
'Inappropriate defaults can be adverse to consumers, as they are unlikely to notice the change in status that has been applied to their member account and take action to fix the issue. We are taking follow-up actions with funds about the issue of defaults,' said ASIC Deputy Chairman Peter Kell.
ASIC notes that the superannuation industry is currently considering insurance issues through the Insurance in Superannuation Industry Working Group (ISWG). ASIC expects the findings in this report will be considered by the ISWG.
The findings of this report will also inform two of ASIC's compliance projects which are underway in superannuation for 2017, 'Employers and Super' and 'Insurance in Super'. In particular, the deeming by default of members as 'smokers', and the associated cost of additional premiums, will be examined to see how widespread the practice is.
'We intend to make public the results of our 2017 project work. Now is the time for trustees to consider whether their practices are in the best interests of members, as well as whether their members are adequately informed of decisions affecting them,' Mr Kell said.
Background
The 'Employers and Super' project is considering the role employers play in the superannuation system. The project will look at advice provided to employers (and how this is paid for), benefits and services offered, as well disclosures employers receive directly from trustees and third parties.
The 'Insurance in Super' project is looking at disclosure and complaints handling issues, as well as issues of incentives, conflicts and culture associated with insurance in super.