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Trustees urged to improve member insurance outcomes

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Superannuation trustees have been urged to look into ways to improve outcomes for group insurance members after a new report found wide variations in the design and pricing of default cover.

In the report from the Australian Securities and Investments Commission (ASIC), it was also found members of some super funds may be receiving relatively low value for money and trustees have shortcomings in data and analysis.

“Trustees should reflect on the findings in this report,” ASIC said. “The pivotal role trustees play in designing default cover and buying insurance on behalf of their members means that they need to be accountable for the outcomes their members receive.”

ASIC says trustees need to measure and understand the outcomes they are delivering to different cohorts of their members. They should take into account this understanding when they are designing and pricing their default insurance arrangements.

When the design and distribution obligations regime comes into effect on October 5 next year, super trustees will be required to design fit-for-purpose products that meet consumer needs, and to take steps to ensure their products are reaching the right consumers.

ASIC says the changes mean trustees will need to ensure that insurance arrangements are considered when identifying the target market for a choice offering.

According to the ASIC report, 86% of super members with insurance have it on a default setting. Many of the members are not even aware that they have insurance through their superannuation, or that they are paying for it.

“Many Australians hold life insurance through their super fund,” ASIC Commissioner Danielle Press said. “Almost 10 million superannuation accounts have insurance attached, and a majority have the default insurance offered by the fund.

“The decisions superannuation trustees make about default insurance arrangements are important because most fund members stay with the default.”

Click here for the report.