An Australian Securities and Investments Commission (ASIC) follow-up to its review of superannuation trustees has found they have not made “sufficient effort” in all areas to improve life insurance outcomes for members.

Claims handling processes, use of real-time data and helping members understand their insurance coverage are all areas where more work is needed, ASIC says.

“I strongly encourage all trustees to commit to a thorough analysis of their insurance arrangements using the information and action points in ASIC’s report to identify where they fall short and address any gaps,” Commissioner Danielle Press said.

“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.”

She says trustees are well placed to identify and prevent harms such as members paying for insurance they cannot claim on when they need to.

The review of 15 trustees last year looked at whether trustees had made progress in addressing the issues raised by ASIC in various public communications since 2019 and were meeting new regulatory obligations.

It finds 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 total and permanent disability (TPD) definitions.

Of the 15 trustees, 12 have changed eligibility criteria so that fewer members will be subject to “activities of daily living” definitions and/or have amended the restrictive definitions. The remaining three trustees were still in the process of making these changes.

ASIC says data on claims handling suggest the trustees and their insurer partners can do more to remove frictions, including by helping members to understand what their insurance covers and what they need to do to make a successful claim.

The share of withdrawn TPD claims increased to 6.7% in June 2022 from 5.0% two years ago, and the number of disputes relating to insurance in superannuation claims that are recorded by insurers through internal dispute resolution remains “relatively high”.

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

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