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Broad super code of practice needed
The superannuation industry needs a broad-based code of practice and dumping the insurance code of practice should be a catalyst to develop one, according to a super lawyer.
Berrill and Watson principal, John Berrill, told Super Review said while the law imposed on super funds how to treat members, it did not provide details and codes of practices put “flesh on the bones” on what acting in best interest meant for specific interactions such as information sharing, member enquiries, complaints, and claims.
“Super is no different to any other financial service in that regard. Super funds say ‘oh we are different because we are a not-for-profit, acting in best interests, and this is not a straight commercial relationship’,” Berrill said.
“The answer to that is for some super funds it is a straight commercial relationship, like retail funds. But even for those where it is not a full-on commercial relationship, problems happen and guidance from codes of practice provide a good benchmark as to how you behave and what they also provide is an audit function and to be robust, have a code compliance committee and external oversight to hold them to account and do the right thing.”
Berrill noted this was especially important for death benefit claims as it was a fraught process as they were dealing with people at a time of great vulnerability.
“We have the general rules in having to act in members best interests but we don’t have specific rules around how that’s to play out. Super funds and how they treat problems vary from one fund to another,” he said.
“Some funds have multi layers of internal claim or complaint procedures. Some make preliminary decision before they make final decisions and it can string out the process and the experience. Death benefit claims are a good example where robust codes of practice with oversight and a robust compliance requirements and reviews are important – but we don’t have them.
“…The way funds deal with death benefit claims varies widely. Some are really good and some not. If we had guard rail on these things it can be really informative for funds and give them good info, and support to make enhance the member experience.
“This insurance in super withdrawal can be a catalyst and provide an opportunity to get act to together on a general superannuation code.”
Berrill said it was incumbent on the industry to develop a code and pointed to banks which had had a code of practice for over 20 years, general insurers that had had a code for over 20 years, and life insurance that had had a code for the last four years.
“Codes are well regarded by the consumer movement, real positive for consumer experience and they’re important and super is no different from anybody else in that regard,” he said.
Berrill noted the super industry would likely push back on the idea of a code as they had done with the insurance in super code and that the resistance was partly cultural due to the industry taking the view that it was always acting in members’ best interests.
“They’ve pushed back idea of the insurance in super code and if that’s an indicator they probably will resist it,” he said.
“It comes back to businesses not liking regulation and they tend to have a reflex reaction against regulation and oversight."
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