The Insurance in Superannuation Working Group (ISWG) is unlikely to go far enough in implementing the strong code of conduct badly needed by the superannuation industry, according to Maurice Blackburn Lawyers principal, Kim Shaw.
In a column to be published in the upcoming print edition of Super Review, Shaw has welcomed the Government’s examination of opt-out life insurance in superannuation but said addressing the erosion of retirement funds was only one part of the challenge.
She has urged that any code of conduct around insurance in superannuation should be approved by the Australian Securities and Investments Commission (ASIC).
“A critical component in this fix must be the implementation of an enforceable and rigorous code of conduct,” she said. “The industry believes it has ticked the box on the development of a code, after the Financial Services Council [FSC] released a life insurance code of practice last year. That same code is now under consideration to be extended to superannuation funds, as part of the Insurance in Super Working Group [ISWG] process.”
“While this may sound like progress, the truth is that the industry is still nowhere near close to the implementation of the strong code of conduct that is so badly needed if the industry is to be properly reformed as a whole.”
Shaw said a rigorous and enforceable code of conduct should have teeth, with its focus being to put the genuine interests of consumers first.
“It must cover the entirety of the industry and be inclusive of third parties acting on behalf of fund members, including lawyers, financial counsellors and advisors.” she said. “The FSC code however has all the bite of a month-old lettuce – a narrow restatement of the current law that is voluntary, has not been approved by ASIC, has had little buy-in across other stakeholders, has no formal oversight and crucially, would do little to prevent the many scandals that continue to be exposed within the industry. “
Shaw said that with the formation of the ISWG came the hope that the FSC code would be given a rigorous overhaul, with the ISWG noting that a code for super funds was a ‘key deliverable’.
“To date however it seems that all the ISWG is prepared to implement is an extension of the existing FSC code, focussed largely on claims handling without addressing the pressing need for any code to also ensure consistency in definitions and process, including real remedies and sanctions for those who fall short,” she said.
“Indeed, the Association of Superannuation Funds of Australia (ASFA), a major player in the ISWG process, has argued only recently in a submission that it is concerned about any role for ASIC with respect to approval and monitoring of codes – ludicrously seeking to state that such enforcement will add to the regulatory burden and not lead to better consumer outcomes.”
“In short, they all appear to be heading towards the FSC tool kit, opting only for a weak extension of an already weak regime,” Shaw said.