ASIC review reveals inadequacies in communications around death benefits
/Author: Erin Weaver
ASIC has recently released its key findings from the initial phase of a comprehensive review of superannuation death benefits processes. The results of the review found failures in the way trustees are disclosing and communicating important information to members around the topic of death benefits.
Whilst not great news for the industry, this review has provided a framework that trustees can utilise to make the needed improvements in their communications and disclosure to hopefully ensure they stay out of the regulator’s spotlight.
Superannuation regulations and comms/disclosure are certainly areas of expertise for us here at Mayflower Consulting and our passion is to help our clients remain on the right side of compliance. To that end, we host the quarterly NSW ASFA Legislation Discussion Group*, where we highlight topical compliance issues affecting the industry. Our July topic was superannuation death benefits, where we specifically discussed the findings of the ASIC review. Our guest presenter was Simun Soljo, a partner at Allens Linklaters and financial regulations expert, who guided us through the findings and implications for trustees.
Before getting into the review and ASIC findings, let’s discuss how death benefits became the hot-topic issue it is today?
Superannuation member complaints on the rise
In October 2023, AFCA identified superannuation death benefits claims handling as a systemic issue, putting funds on notice. The latest data release on the AFCA sites shows death benefits handling complaints at a significant 12.5% of total complaints handled.
Source: https://data.afca.org.au/complaints-by-product.
The number of complaints received in this area has also been steadily increasing in recent years, further highlighting the issue industry-wide.
ASIC review
As part of their oversight responsibilities to disclose systemic issues to regulators, AFCA reported these findings to ASIC, highlighting the urgency of the matter. In response, ASIC included death benefits claims handling as a key priority in their 2024 agenda, announcing in February 2024 it would be conducting an industry review.
Phase one of ASIC’s review focused on the adequacy of information that is publicly provided to members regarding death benefit claims. ASIC reviewed the websites of 22 trustees, encompassing 2/3 of the total industry. The review sought to examine the clarity and accessibility of information related to:
Nominating beneficiaries
Explaining processes in a straightforward manner.
Proving clear timeframes for application and detailed instructions on how to apply.
Key findings
ASIC's findings revealed that many trustees fail to present information in an understandable way, often using complex legal jargon that can confuse members. In some cases, essential details about nominating beneficiaries and the application process were either missing or buried deep within lengthy documents.
In his presentation, Simun reinforced this, noting that:
"The death benefit nomination and claims process can be complex and confusing to members and beneficiaries. The situation is not helped by differences between funds in terms of how members can make nomination and the effect of different types of nominations on the trustee's discretion. At claim time, there can also be differences in the way superannuation and succession law apply to a member's assets, which can result in confusion and disappointment for some beneficiaries, and lack of understanding about what trustees need to do and how long the process might take. All of this highlights the need for trustees to ensure communications with members and beneficiaries are clear and easy to follow."
The implications
ASIC’s findings are a call to action for all superannuation funds. Trustees should expect increased scrutiny and possibly penalties on those funds who do not improve their standards.
The implications to funds in terms of their relationship with members could be far more damaging than penalties issued by regulators. Members who are completing a death benefit claim are already quite vulnerable. To then leave that member floundering in a confusing framework of incomplete information, complicated processes and technical language can instil distrust in the fund, which may be irreparable.
Proactive steps to improve your internal death benefit claims handling
ASIC’s review has provided a starting point for funds to improve how they communicate important information to members around the death benefits process. By taking a few proactive measures now, funds can potentially avoid member dissatisfaction and regulatory enforcements.
Here are our key takeouts from the ASIC report:
Ensure your website accurately reflects your documentation without overwhelming and unnecessary detail. Provide links to more detailed documents where necessary.
Use simple, concise language that is easy for members to understand. Nearly 50% of Australians today read at a low level and the Australian Government Style Manual recommends writing content to an Australian year 7 level to make content understandable for the most people. Absolutely no jargon.
Incorporate real-life examples or hypothetical scenarios - members may find these more relatable.
Use visual aids like infographics, charts and videos to explain complex processes visually.
Offer translations or translator services to make documents and information accessible to non-English speaking members.
Implement interactive tools to your website such as online forms, calculators and chat function. This will lessen delays in processing.
Do not hide important information in documents. If you really want the average member to understand why and how to make a binding nomination, then this needs to be explicitly laid out. Pop-out box or different coloured text are helpful, whether in a printed document or on the website.
Ensure all information is consistent across your website, documents, letters and customer service scripts.
Have a dedicated area for resources on death benefit claims. This could include any guides, contact information, video recordings and FAQs.
Future regulatory action
We know this issue remains a priority for both AFCA and ASIC moving forward and funds should certainly expect further scrutiny in the near future.
As for the ASIC review, with the first phase completed, we will be eagerly awaiting the findings of the second phase. According to the ASIC website, this is coming up (or possibly underway) and will look to examine more closely the data and processes around death benefits handling from a sample of trustees.
Need a health check on your comms?
At Mayflower, we work with our superannuation clients on all aspects of member communications, including reviewing and improving website copy, providing crisis communication strategies and disclosure management. We are dedicated to staying across the various regulations and legislations that affect the industry. If you need a health check on your communications processes, please reach out for an informal chat.
*We always have engaging speakers (thanks Simun!) and interesting topics at the monthly ASFA NSW Regs and Legs Discussion Group sessions. Interested in joining the next one? Email deb@mayflower.com.au