Following the establishment of the new ombudsman scheme, the Australian Financial Complaints Authority (AFCA), ASIC decided to review its standards for internal dispute resolution (IDR) processes, RG 165, and called for submissions*.
Submissions closed in early August 2019 and they have raised some interesting and thorny issues for superannuation funds and insurance companies.
The consultation paper issued by ASIC floated a number of reforms including reducing IDR complaint time limits, expanding what constitutes a complaint and increasing data collection and reporting obligations.
Proposal to reduce IDR decision-making time frames
The most contentious of the proposed reforms is to reduce the time for decision-making on an IDR complaint to 45 days for superannuation complaints, and to 30 days for all other complaints.
Currently, super fund trustees have 90 days in which to make decisions on superannuation complaints. However, under the Insurance in Superannuation Voluntary Code of Practice, responses to complaints involving insurance benefits must be provided in writing within 45 days, unless there are exceptional circumstances, in which case the time limit is 90 days.
Life and general insurers currently have 45 days to make decisions on IDR complaints under their codes of practice.
The ASIC paper justifies the reduced timelines on the need to harmonise IDR complaint time frames across the financial services sector, to drive greater efficiency and to improve consumer experiences.
They also propose to restrict the bases on which exceptional circumstances extensions can be invoked.
The Financial Planning Association (FPA) submitted that a universal 45-day time limit was appropriate and that it may be impossible to turn around complaints in any shorter timeframe.
For its part, the Association of Superannuation Funds Australia (ASFA) supports the extension of the voluntary code 45-day time limit across the superannuation sector whilst maintaining the ability of a trustee to send a "delay notification" in recognition of the complexity of many superannuation complaints.
Consumer groups have welcomed the proposals but are generally pushing for 30-day timeframes with limited and prescribed exceptional circumstances extensions.
ASFA argues that unlike binary banking and general insurance complaints, many superannuation complaints involve multiple parties, including disability and death benefit complaints, and some defined benefit complaints can involve complex trust deed interpretations and calculations.
Whilst this is true, it does not account for all superannuation complaints, many of which are in fact complaints against trustees alone for administrative or process errors. For example, 47% of all complaints lodged with the Superannuation Complaints Tribunal in 2017/18 were classified as administrative complaints.
Given that the superannuation and life insurance industries have moved to 45-day time frames for dealing with insurance-related complaints under their codes of practice, it should only be in limited circumstances that extra time would be required, even allowing for the fact that trustees have statutory obligations to pursue disability claims were it is reasonable to do so.
Superannuation death benefit disputes can involve multiple claimants and are subject to a 'claims-staking' process which has generally worked well to date. This process could run foul of a 45-day time limit and may require some tinkering. However, the fraught nature of death benefit disputes means shorter resolution times are preferable for all concerned.
There is no compelling reason why administrative complaints cannot be dealt with by trustees in the same 30-day time frame that banks and credit providers are required to deal with complaints. It would be open to superannuation funds to restructure their decision-making and complaints processes to accommodate the shorter turnaround.
The safety valve of delay notifications would remain available for some complaints that cannot be dealt with in the more aspirational timeframes and as ASIC noted, under AFCA's "refer back process" trustees and insurers will be given another opportunity to resolve complaints lodged with AFCA.
The expanded definition of a complaint is designed to accommodate new social media channels and platforms. This is laudable but, as some submissions have pointed out, caution must be taken to ensure that mere expressions of dissatisfaction are not necessarily required to be logged as complaints.
Explicit requirements for meaningful reasons for decisions are a no-brainer to enhance consumer understanding and represent an expansion of the current statutory requirement for superannuation trustees to provide written reasons for all death benefit complaints but only for other complaints upon request.
Similarly, data collection and reporting are commonsense recommendations that build on the initiatives in the codes of practice.
In short, the recommendations represent an overall enhancement of the consumer experience of IDR and will improve confidence in industries that have copped a battering lately.
However, changes will count for little unless there is robust oversight by independent code compliance committees.
*please forgive the wall-to-wall acronyms