APRA strengthens insurance inside super rules
The Australian Prudential Regulation Authority (APRA) has made key changes to its approach to insurance inside superannuation in response to industry feedback including strengthening the rules around balance erosion and third-party arrangements.
The changes have been outlined by APRA in a response paper published today with the regulator clearly concerned to ensure that related-party insurance arrangements are both independently assessed and certified as being in the best financial interests of members.
Superannuation funds will also be required to undertake “rigorous analysis” to ensure that the type of insurance they offer members does “not inappropriately erode the retirement income of beneficiaries.
The APRA documentation states that superannuation funds should consider the benefits and risks of insurance arrangements in strategy, in the context of its membership profile.
A key part of the APRA approach is that superannuation funds will have an obligation to make it easy for members to easily opt out of insurance including better communications around the benefits and costs of insurance arrangements.
APRA said the new arrangements would come into effect on 1 July, next year, with superannuation funds encouraged to get their houses in order before that start date.