The proposed insurance code of practice for superannuation trustees should have “regulatory solutions” involving the Australian Securities and Investments Commission (ASIC), AustralianSuper says.

The Insurance in Superannuation Working Group is consulting on the code, which outlines standards and new measures for all classes of cover paid for via super.

“The code would only be effective if trustees of superannuation funds are bound by the code,” AustralianSuper says in a submission.

“We therefore suggest [the working group] should consider regulatory solutions that involve code approval by ASIC, which would ensure the code has appropriate regulatory sanction.”

AustralianSuper agrees with the aim of the code, which also has backing from a member of the working group, the Australian Institute of Superannuation Trustees.

The institute says it “strongly supports the code being endorsed by ASIC… and for confirmation of ASIC’s preparedness to do this to be pursued as matter of priority”.

The Financial Planning Association (FPA) suggests including minimum quality standards for group insurance in the code, especially in relation to when the insurer will pay.

Restrictions on downgrading a member’s cover once in force and on underwriting at claims time should be added, it says.

The working group aims to have a final version of the code ready by the end of the year, before implementation on July 1. There will be a transition period until June 30 2019.

But the FPA is concerned the arrangements will not enhance minimum standards for consumers during the transition.

“Further, there may be a risk that the transition arrangements would incentivise insurers and trustees to actually reduce the quality and value of their insurance offerings in the short term, to capture additional gains while available,” the FPA says.

“For example, it may be beneficial to raise premiums in the short term to capture gains before the cap on insurance premiums takes effect.”

The FPA is concerned about substantial reductions being made to members’ level or quality of cover without their consent. It says trustees should inform members of any changes to their cover and warn of the risks of underinsurance and undersaving.

“Should a member wish to retain their existing level of cover, they should be able to do so quickly and easily,” the FPA submission says.