The prudential regulator has finalised its revisions to its insurance in superannuation prudential standards and has made changes following industry consultation.
The Australian Prudential Regulation Authority’s (APRA’s) Prudential Standard SPS 250 Insurance in Superannuation (SPS 250) was due to commence on 1 July, 2022.
The finalisation of the standard fulfilled recommendations 4.14 and 4.15 of the Hayne Royal Commission and the regulator had now finalised tis response to all 10 recommendations directed to it.
APRA said the key changes made to the finalised framework included:
- Conflicted arrangements – Heightened obligations on the registrable super entity (RSE) licensee to assess whether there were any conflicted provisions or business practices with respect to insurance arrangements, and whether they were appropriate and in the best financial interests of beneficiaries;
- Independent certification – Modified to only be required to consider the best financial interests of beneficiaries and did not require to also assess the arrangement satisfied legal and regulatory requirements given duplication;
- Insurance strategy – Amended to reinforce APRA’s expectations that an RSE licensee undertook rigorous analytics to ensure that the kind and/or level of insurance offered did not inappropriately erode the retirement income of beneficiaries;
- Insurance management framework – Enhancements made to ensure RSE licensees maintain a sound framework and robust decision-making, and in particular consideration must be given to conflicting arrangements;
- Member matters – Clearer expectations for RSE licensees in assisting members to make decisions about their insurance arrangements, including the ability to easily opt out of insurance, and for RSE licensees to ensure rules for attributing a status to a member for their insured benefit were fair and reasonable; and
- Data management – Data transferred under a successor fund transfer is expected to be sufficient so that an RSE licensee of the successor fund was able to effectively administer the insurance arrangements and meet reporting obligations.