ASIC reaches into super trying to couple DDO with member outcomes
The Australian Securities and Investments Commission (ASIC) has revealed that superannuation funds are being subjected to the same sort of scrutiny as life/risk advisers in terms of their insurance inside superannuation offerings.
Not only that, ASIC had revealed it is pressing superannuation funds to take into account Design and Distribution Obligations (DDO), even though those obligations do not apply to MySuper products. In doing so, it had sought to couple the DDO regime with the Australian Prudential Regulation Authority’s (APRA’s) member outcomes test.
In an article published this week, ASIC said it was continuing to review the industry’s progress on improving insurance outcomes for members, particularly in default insurance.
“Our objective is to address inappropriate and poorly communicated insurance in superannuation that results in higher premiums and the improper erosion of members’ retirement benefits. We aim to encourage new behavioural norms among trustees in the communication, design and claims processes for insurance to improve the benefits of insurance in super for members,” ASIC said.
At the same time, ASIC acknowledged that its Design and Distribution Obligations did not apply to MySuper products but argued that there was still significant work to be undertaken by fund trustees and suggesting that its DDO regime could be coupled with the APRA Member Outcomes regime.
“The requirements of the DDO regime and APRA’s Member Outcomes regime collectively form a cycle where products are designed, sold and reviewed to determine if they are still meeting their objectives and then amended or re-designed if required,” ASIC said.
“We strongly encourage trustees to engage with DDO now and consider how they can implement both the DDO and Member Outcomes regimes simultaneously to make the most of the synergies between them.”
“In order to comply with the DDOs, trustees need to have strong product governance processes that encompass planning around the needs of potential members, understanding about how products operate in practice for members, and review and action based on evidence.”
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