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APRA finalises insurance in super prudential changes

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The Australian Prudential Regulation Authority (APRA) says it has finalised revisions to requirements and guidance relating to insurance in superannuation, with the changes to commence on July 1 as previously outlined in consultation.

APRA says the changes to prudential standard SPS 250 Insurance in Superannuation and the accompanying prudential practice guide SPG 250 are aimed at ensuring better member outcomes through updated requirements for trustees to select, manage and monitor members’ insurance arrangements.

The changes stem from the Hayne royal commission and APRA consulted extensively with the industry over two years before proceeding with the reforms.

APRA confirmed in a response paper last week that the revised SPS 250 will require trustees to strengthen arrangements to protect members from potential adverse outcomes caused by conflicted life insurance arrangements.

This will include robust decision-making in the negotiation and ongoing review of insurance arrangements, the regulator said.

Trustees must also obtain an independent certification of related party insurance arrangements before entering into, or materially altering, an insurance arrangement, and on a triennial basis.

They must also strengthen data management to improve analysis of member outcomes across different groups superannuation fund members.

Additionally, enhanced prudential guidance in SPG 250 will facilitate easy opt-out of insurance for members, and ensure premiums do not unduly erode members’ retirement incomes. The changes will start on July 1.

Click here for the response paper.