ASIC has released its member experience report for superannuation funds in Australia, with a focus on improving the experience and outcomes of those less-engaged members. The review lays out key principles to improve member experiences, with some areas of improvement highlighted. This includes the provision of insurance via super funds and disclosure practices.
The review maps out the three stages of the superannuation life cycle - joining a fund, participating in a fund, and changing or leaving a fund. The review examined each stage for its specific risks and problem areas, and looked at how these potential issues were being managed by funds. Top concerns were changes occurring to a member's fund without their consent, including variations to insurance policies.
Concerns were raised regarding poor disclosure - insurance may have changed or ceased without a member being adequately advised by the fund. Issues arise when disengaged members are not fully aware of their options or the changes, and funds are not ensuring members fully understand before going ahead.
Inappropriate defaults were also flagged as an issue, for example when trustees have moved members within a fund, and calculating members as smokers when in fact they have no evidence either way that a person smokes or not, resulting in an improperly calculated premium. It is inappropriate to assume risks such as smoking, since smoking is decreasing overall in Australia and numbers of smokers are lower than ever. It isn't known how widespread this issue is at this stage, but it is being investigated. The main issue with this assumption is that a disengaged member won't notice or take steps to correct the issue and possibly receive a refund.
The Insurance in Superannuation Working Group (ISWG) is working through these issues, with the findings in this report also set to inform further compliance projects currently underway at ASIC: Employers and Super, and Insurance in Super.
The Employers and Super project is examining the role employers play in the super system, looking into advice provided to employers (and how this is remunerated), the benefits and services they are offered, plus disclosure from trustees to employers.
The Insurance in Super project is examining disclosure and complaints handling issues, incentives, conflicts, and culture.