The financial relationship between life insurers and superannuation fund trustees should be placed under scrutiny by the regulators, according to the Parliamentary Committee report on the Life Insurance industry.
A key recommendation from the Parliamentary Committee on Corporations and Financial Services report is that the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) should “immediately undertake an audit of all superannuation trustees”.
It said this should be undertaken “to identify the nature, purpose and value of all payments, including any 'soft-dollar' benefits that occur between life insurers and trustees or any related parties in connection with the provision of default insurance to members of MySuper and choice superannuation products, including:
- current and historical payments made by life insurers to trustees or any related parties and/or by trustees to life insurers under profit-sharing, premium adjustment models, experience share arrangements or any arrangement of a similar nature;
- the total premium value attributable to the existence of profit-sharing, premium adjustment models, experience share arrangements or any arrangement of a similar nature between a trustee and a life insurer; and
- payments, including any 'soft-dollar' benefits made or that may become payable by life insurers to trustees or any related parties of trustees for any purpose, for example, subsidisation of administration costs, technology, marketing, sponsorship, hospitality, staff expenses etc.
The committee report has also recommended that the results of such an inquiry be published by ASIC and APRA as soon as practical to ensure confidence in the compulsory superannuation system.