APRA finalises revisions to Prudential Standard SPS 250

The Australian Prudential Regulation Authority (APRA) has finalised revisions to the requirements and guidance related to Prudential Standard SPS 250 Insurance in Superannuation (SPS 250) following two-years of extensive industry consultation.

The final revisions to SPS 250 and the accompanying Prudential Practice Guide SPG 250 Insurance in Superannuation (SPG 250) aim to ensure better member outcomes through updated requirements for trustees to select, manage, and monitor members' insurance arrangements.

APRA's paper confirmed that SPS 250 will require trustees to:

• Strengthen arrangements to protect members from potential adverse outcomes caused by conflicted life insurance arrangements, including robust decision-making in the negotiation and ongoing review of insurance arrangements;
• Obtain an independent certification of related party insurance arrangements before entering into, or materially altering, an insurance arrangement and on a triennial basis; and
• Strengthen data management to improve analysis of member outcomes across different groups of superannuation fund members.

Meanwhile, the enhanced prudential guidance in SPG 250 will facilitate easy opt-out of insurance for members and ensure that premiums do not unduly erode members' retirement incomes.

Read more: APRA releases consultation paper on proposed revisions to SPS 250

In September 2021, APRA sought industry feedback on its proposed revisions to SPS 250 and SPG 250, deemed crucial to ensuring that RSE licensees meet their obligations to select, monitor, and manage insurers prudently.

The completion of the revisions fulfils recommendations 4.14 and 4.15 of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry (Royal Commission) – which means APRA has now finalised its response to all of the Royal Commission's 10 recommendations released in 2019.

The enhancements to SPS 250 will commence on July 01, 2022. Copies of the response paper, SPS 250, SPG 250, and public submissions are available on the APRA website. APRA encourages trustees to reassess their insurance arrangements and strategy, risk, and compliance frameworks in preparation for this date.