The Insurance in Superannuation Working Group (ISWG) has proposed ways to improve transparency around premium adjustment mechanisms.

Super funds should be required to disclose whether they use such mechanisms, it says in its latest discussion papers.

Trustees with a mechanism arrangement in place should have a documented policy made publicly available and allocate any payment from the mechanism to the fund’s insurance reserve, the group says.

Premium adjustment mechanisms refer to arrangements between certain funds and their insurers to return some group risk premium payments to the fund where the claims experience is less than assumed, and vice-versa.

The ISWG wants submissions on the proposals in its discussion papers, the fifth tranche as the group moves towards developing a Life Insurance Code of Practice for super trustees.

“Given the public interest in these mechanisms, it is very appropriate arrangements are formalised consistently in all cases, properly disclosed and operate within tight parameters that protect members’ interests,” Chairman Jim Minto said.

“Under this proposal, any excess that arises can only be used by a trustee to offset future premiums for insured members.”