Superannuation trustees will need to meet new independent certification standards prior to signing or renewing a group life insurance contract with an insurer, under proposed changes to insurance in super prudential standards.

The mooted changes meet recommendations in the final report of the Hayne royal commission. The recommendation states the Australian Prudential Regulation Authority (APRA) should require licensees that sign a contract or understanding with a life insurer, or otherwise give an insurer priority to provide group life cover, to provide APRA with independent certification that the arrangements and policies are in the best interests of members.

A trustee will need to provide the certification within five business days, and no later than one month prior to the signing of the agreement. If the insurance arrangement is for a term exceeding three years, the certification must be provided to APRA every two years.

APRA is also making changes to ensure that the way in which trustees attribute a particular employment status to members in relation to their insurance arrangements is fair and reasonable. This will ensure appropriate consideration of insurance outcomes provided for members under the arrangements, APRA says.

It will also make changes to the standards relating to the cost of insurance not inappropriately eroding account balances and make it easier for members to opt-out of insurance cover. Some trustees weren’t giving adequate consideration to the cost of insurance, APRA says.

Transitional requirements will start in July next year, with the remaining starting in January 2021.

APRA is seeking feedback on the compliance costs of the proposed changes, by February 3 next year. A revised guide will be released in the first quarter.

The APRA letter can be found here.