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Issue 687, 27 September 2018 
In this issue: 

 

Royal Commission: policy issues and questions about insurance in superannuation 

Last week the Royal Commission into misconduct in the banking, superannuation and financial services industry concluded its sixth round of hearings, which focused on insurance. 

The Commission has now invited submissions in relation to the policy issues identified during the hearings. ASFA, as the peak body for superannuation and a code owner of the Insurance in Superannuation Voluntary Code of Practice, will make a submission in response to those issues which relate to insurance in superannuation. 

Counsel Assisting has identified some specific questions to assist parties in preparing for written submissions. Those specifically relating to insurance provided through superannuation are: 

  1. should universal minimum coverage requirements, key definitions and/or key exclusions be prescribed for group life policies offered to MySuper members? 
  2. should group life insurance policies offered to MySuper members be permitted to use a definition of “total and permanent incapacity” that derogates from the definition of “permanent incapacity” contained in regulation 1.03C of the Superannuation Industry (Supervision) Regulations 1994? 
  3. should registrable superannuation entity (RSE) licensees be obliged to ensure that their members are defaulted to statistically appropriate rates for insurance required to be offered through the fund under section 68AA(1) of the Superannuation Industry (Supervision) Act 1993)? 
  4. should RSE licensees be prohibited from engaging an associated entity as the fund’s group life insurer? 
  5. alternatively, should RSE licensees who engage an associated entity as the fund’s group life insurer be subject to additional requirements to demonstrate that the engagement of the group life insurer is in the best interests of beneficiaries and otherwise satisfies legal and regulatory requirements, including the requirements set out in paragraphs 22 to 24 of Prudential Standard SPS 250 Insurance in Superannuation? 
  6. are the terms set out in the Insurance in Superannuation Voluntary Code of Practice sufficient to protect the interests of fund members? If not, what additional protections are necessary? 

If you have any feedback that you would like ASFA to consider in relation to these matters, please forward it to Byron Addison by close of business Wednesday, 10 October 2018. 

 

 

Stronger penalties for financial sector misconduct 

The Government has released a draft of proposed legislation to reform the breach reporting rules for Australian Financial Services (AFS) licensees. 

The draft legislation seeks to: 

The reforms implement some of the recommendations of the ASIC Enforcement Review Taskforce (see ASFA Action issues 668 and 625). 

Treasury is seeking submissions by 23 October. 

 

 

Breach reporting by AFS licensees: ASIC report 

ASIC has published the findings from a recent review of breach reporting processes by Australian Financial Services (AFS) licensees. 

ASIC’s Report 594 Review of selected financial services groups’ compliance with the breach reporting obligation outlines the findings from a recent review of the breach reporting processes of 12 financial services groups. Key findings from the report included: 

Once a financial institution has investigated and determined that a breach has occurred and that it is significant, AFS licensees are required to report the breach to ASIC within ten business days. ASIC’s review found that this timeframe was being significantly exceeded in many cases. 

Announcing the release of the report, ASIC Chair James Shipton said there is an “urgent need for investment by financial services institutions in systems and processes as well as commitment and oversight from boards and senior executives to address these significant failings”. 

In the report, ASIC notes that all AFS licensees should benefit from robust benchmarking of their performance and resources, to assess the effectiveness of their own breach reporting processes and make improvements where weaknesses are identified. ASIC indicates that it is seeking to influence the entire financial industry with their findings and better equip AFS licensees to monitor their own performance, internally, as well as against their peers. The report states ASIC’s expectations for industry and identifies opportunities for improvement to strengthen the effectiveness of breach reporting processes that should be considered as additional guidance to supplement Regulatory Guide 78 Breach reporting by AFS licensees. ASIC has also set out actions it will take to improve breach reporting. 

 

 

AFCA: interim funding model 

The Australian Financial Complaints Authority (AFCA) has finalised the terms of its interim funding model. 

The interim funding model will apply until the end of the 2021 financial year, while AFCA establishes an evidence base of complaint volumes and complexity to enable it to develop a full user pays model. During the interim funding period, superannuation providers will be subject only to an annual superannuation membership levy, based on the model used to determine the superannuation supervisory levy collected by APRA. 

AFCA members can access more detailed information on the funding model through AFCA’s secure services portal. 

 

 

ASFA REGULATORY WATCHLIST

ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations

and other regulatory announcements relevant to superannuation.

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