The Insurance in Superannuation Voluntary Code of Practice (Code) was released by the insurance in superannuation working group on 13 December 2017, with a proposed date of commencement for 1 July 2018.

The Code has been the subject of much comment. However, despite the comment, the deadline for Trustees to register their intention to adopt the Code by 31 March 2018 remains.

Adopting the Voluntary Code

Between now and 31 March 2018 Trustees ought to consider the practical implications for their funds of the key obligations contained in the Code and determine whether or not they intend to adopt the Code.

In practice, adopting the Code means that Trustees would need to consider the key obligations (see the table below) and review their compliance with those obligations.

How voluntary is the Voluntary Code?

The Code is to be adopted on a voluntary basis, where its standards are to be upheld on an “if not, why not” basis. This allows some flexibility for Trustees to justify why certain benefits or aspects of the scheme may not achieve full compliance.

This flexibility is an essential part of the Code. Without flexibility, Trustees may struggle to justify why they had fettered their discretion. The many submissions on this point resulted in the code being voluntary and also being subject to existing laws, regulations and the best interests of beneficiaries. Trustees are still required to develop their own insurance strategy to accommodate their own membership base, and where that strategy does not fit with a particular aspect of the Code, Trustees need only report on why they did not comply with that particular aspect. In that way, Trustees may still exercise discretion.

However, we think the release of the Code may have already changed the superannuation landscape regardless of whether Trustees choose to adopt it or not. For example, if the Code is held out as industry best practice, any subsequent challenges or complaints may be brought on the basis that a Trustee has not upheld industry standards as described in the Code. Accordingly, even if Trustees choose not to adopt the Code, that decision should be considered and documented on an “if not, why not” basis, to mitigate the incidence of any future complaints.

Trustees may also consider whether compliance with the Code may provide a marketing advantage or disadvantage.

Finally, Trustees should remember that although the Code takes effect from 1 July 2018, it may be phased in over time. By 31 December 2018, Trustees must publish their own transition plan, detailing how the Code will be implemented in line with certain policy renewals and other fund events. So, if there are areas of concern or difficulty for Trustee compliance, those areas should be specified in the transition plan and the difficult aspects of transitioning to the Code may be scheduled for a later time.

Please call us with any queries, or if you would like us to send you some additional tools to work through the key obligations of the Code.

Key obligations under the Code

1Appropriate cover
  • Trustees need to review the benefit design for automatically insured members and benefit design structured and subsidised by Employers
  • Arrange any necessary data cleanse to provide good data for Trustees to considerConduct an affordability assessment
  • Consider erosion of benefits
  • Trustees ought to review and simplify the process for cancelling insurance
  • Trustees ought to review the terms of their insurance policy to determine reinstatement conditions
2Informing members
  • Review member communications (including all disclosure documents, fact sheets, website communications and tools, and advice scripts) for clarity and consistency
  • Prepare a simple Key Fact Sheet and insurance welcome pack
  • Ensure consistent terminology is used between Trustee communications and definitions in the insurance policy
3Handling claimsReview claims handling policy: All claims handling policies should be fully reviewed with clearer time frames and a clear Trustee role in the claims process
4Premium adjustmentTrustees must disclose all premium adjustments or other insurance rebates to Members
5Promoting insuranceTrustees will need to review all marketing material which purports to promote insurance benefits for clarity, consistency, and accuracy
6Staff and service providersStaff will need to be trained in how to appropriately identify and manage members bringing claims