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ASIC finds ‘inconsistencies’ in group cover code adoption

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Adoption by super trustees of a voluntary code of practice that was introduced more than a year ago is not universal, a report by the Australian Securities and Investments Commission (ASIC) has found.

Just 70% of regulated trustees have signed up fully or partially to the Insurance in Superannuation Voluntary Code of Practice, the report says.

The majority say they expect to be fully compliant with the code by the final cut-off date of June 30 2021.

The 30% yet to sign up include several trustees who have decided not to implement the code at all as they believe their current strategy already aligns with it. They also feel the code is too onerous for their fund and may not be in the best interests of members.

But ASIC says the code, which was designed to improve outcomes for consumers who buy group life cover, has produced progress for trustees who have adopted it.

“Adoption of the code is contributing to a significant uplift in, and standardisation of, processes and services,” ASIC said.

“But adoption is not universal or entirely consistent. We have identified a number of inconsistencies in implementation, some relating to fundamental aspects of the code.

“These inconsistencies relate to which members are covered by the code, the controls around balance erosion, and the calculation of claim timeframes.”

Looking ahead, ASIC plans further work in super-linked group life cover this financial year. In particular, the regulator plans to work with the industry in its development of more practical guidance on how trustees can better meet the needs of vulnerable consumers.

It also remains engaged with relevant government law reform initiatives impacting on insurance in superannuation.