APRA's proposed new group insurance rules preclude sweetheart deals

APRA/trustees/best-interests/superannuation/life-insurance/

25 January 2021
| By Mike |
image
image
expand image

New insurance arrangements proposed to be imposed on superannuation funds will significantly test vertical integration by forcing super fund trustees to not only keep such arrangements at arms-length but obtain certification that they have met member’s best interests.

The new arrangements had been outlined by the Australian Prudential Regulation Authority (APRA) and come amid historic concerns from some life/risk advisers about the manner in which some major group insurance mandates had been handled in the past.

According to new guidance issued by APRA, super fund licensees will need to “demonstrate to APRA that an arrangement with an insurer is negotiated on an arm’s-length basis and is in the best interests of beneficiaries”.

APRA said super fund licenses would be obliged to obtain an independent certification that states it is reasonable for them (the licensee) to form the view that the insurance arrangement is in the best interests of the beneficiaries.

“APRA considers that the key requirement is for an RSE licensee to ensure that the insurance arrangement is in the best interests of the beneficiaries, and the requirement to obtain an independent certification provides independent support for this view,” the regulator said.

“APRA expects the person making the independent certification to assess whether an RSE licensee's decision to enter into, renew, materially alter or keep an insurance arrangement in place for more than three years, is reasonably justifiable as being in the best interests of the beneficiaries.

“That assessment should have regard to the totality of the insurance arrangement and all relevant circumstances at the time of making the assessment. The certification must be obtained ahead of the RSE licensee's decision to enter, renew or materially alter an insurance arrangement.”

Elsewhere in the APRA draft prudential practice guide, the regulator reinforced the need for superannuation funds to make it as easy as possible to opt out of default superannuation, which included making available to members pre-populated online forms.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 2 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 3 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

1 week 5 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

2 weeks 3 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND