A review of default occupational categories in life cover held through super funds has revealed several areas for improvement, according to the Australian Securities and Investments Commission (ASIC).

ASIC says the review of 21 super trustees who used a high-risk occupational category as the default setting for MySuper products often have limited data about members’ jobs.

This approach led many trustees to allocate MySuper product members a particular occupational category for the purpose of life cover unless additional information was provided.

“What occupational category is chosen as default is important because a high proportion of members generally end up in the default category,” ASIC says.

“Funds often select the highest risk category as their default to ensure all members are covered regardless of their occupation. However, this means the premiums are comparatively high.”

Average premiums for default insurance in the highest risk occupational category are about double that of the lowest risk job classification, ASIC says. In five out of 20 cases, the price difference is between three and four times.

“Superannuation trustees should take a considered approach to designing their default insurance cover,” Commissioner Danielle Press said. “While a high-risk occupational default may be appropriate in some circumstances, trustees need to be able to justify their default settings based on their membership base.”

“Our review found that the design and disclosure of occupational defaults are two areas where trustees can do more to improve member outcomes. They can do more by gathering better occupational data about fund members and by providing better disclosure to their members.

“Better occupation data about members will assist trustees in designing fair and reasonable default insurance, and good, clear disclosure can empower their members to make better informed decisions about their insurance arrangements.”

The review explored a range of issues trustees made about their members when settting the fund’s occupational default, the factors trustees considered and how they determined the default was appropriate for members.

ASIC says it has engaged with trustees, most of whom were using a generic label for their occupational default. They have updated their product disclosure statements and website disclosures to include clearer information.

The regulator says trustees may be contravening their legal obligations if they fail to ensure premiums charged to members are based on appropriate statistical assumptions.