Danielle Press.

Super trustees must improve their claims handling processes, according to findings from the corporate regulator, despite some work already being undertaken.

ASIC undertook a review last year to examine actions taken by 15 superannuation trustees, covering three million members, to enhance their life insurance arrangements.

The regulator examined whether trustees had made progress in addressing issues previously raised and whether the funds were meeting regulatory obligations.

Among the major-name trustees included were Australian Retirement Trust, Insignia (IOOF), NGS Super, Telstra Super and Hostplus.

The review also included BT and Mercer Super, with the former due to be folded into the latter by April.

ASIC Report 760, Insurance in superannuation: Industry progress on delivering better outcomes for members, found many trustees have made changes to the design of their insurance arrangements to better meet member needs and provide value for money, such as by changing restrictive TPD definitions.

Of the 15 trustees, 12 changed their eligibility criteria so fewer members will be subject to the “activities of daily living” (ADL) definition, which had been criticised by ASIC.

Across the superannuation industry, the share of TPD claims assessed under an ADL definition has fallen to 1.3 per cent, down from 4 per cent.

Trustees worked with their insurers to streamline their claims processes to make them easier for members to navigate, and have taken steps to enhance their oversight of insurers’ claims handling practices.

Previously, ASIC found the TPD claims process sometimes involved onerous processes to lodge a claim, including lengthy claims forms, long delays, and poor communication.

Some trustees have improved the way they explain their insurance offerings to make it easier for members to understand their insurance and make appropriate decisions for their circumstances.

Most of the 15 trustees have made changes to member communications, with seven recently conducting consumer testing of their communications processes and five having commenced providing members with an annual insurance statement.

Broader work to be done

ASIC commissioner Danielle Press said super trustees have attracted this scrutiny because they play a central role in deciding what life insurance is made available to their members and how it is provided.

“Whether it is default or optional insurance, we want fund members to have confidence that they are receiving value for the insurance they hold through their super and that they will be able to claim on it when they need to,” Press said.

“Trustees are well placed to identify and prevent harms such as members paying for insurance they cannot claim on when they need to.”

However, Press said the trustees have not made sufficient effort in all areas and she has also warned the wider industry the regulator will use its regulatory powers if trustees are not complying with their obligations.

“While the trustees in our review have shown some progress with their insurance arrangements, progress is not necessarily consistent across the industry,” Press said.

ASIC has written individually to the trustees involved in the review to provide detailed feedback, including specific areas where improvements are required.

Press said she encourages all trustees to commit to a thorough analysis of their insurance arrangements using the information and action points in ASIC’s report where they may fall short.

She added the insurers also need to play their part by working collaboratively with trustees to implement any improvements.

“Trustees, in particular, need to ensure they have robust systems, processes and controls to effectively administer their insurance arrangements,” Press said.

“Trustees that fail to do this risk undermining any improvements they are trying to make for their members’ benefit.”

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