The new enforceable internal dispute resolution (IDR) requirements outlined in ASIC’s Regulatory Guide 271 Internal dispute resolution (RG 271) commenced on 5 October. JANE ECCLESTON, Senior Executive Leader, Superannuation, ASIC stresses the importance of a sound IDR framework for members’ experience and confidence in the superannuation system. Here she clarifies what trustees must do to comply.
The RG 271 requirements for the IDR framework strongly emphasise the importance of superannuation trustees having in place the right governance arrangements, underpinned by a member-focused approach.
Listening and responding to complaints from members, or other people with an interest in superannuation benefits, in a timely manner not only addresses a complainant’s individual concerns but also provides trustees an opportunity to learn and to improve all members’ experience of their fund.
Since RG 271 was released in July 2020, ASIC has been engaging with the superannuation industry at various stages to communicate our expectations about the new legal requirements. We have been encouraging trustees to fully understand and embrace the broad definition of complaint in RG 271. This requires rethinking approaches to identifying, recording and responding to complaints and empowering staff to work effectively in light the more expansive concept of complaint.
It is imperative that IDR-related processes are well-run – from the handling of complaints to managing the identified systemic issues and internal reporting. ASIC carried out a voluntary survey of trustee preparedness for the new IDR requirements between April to May 2021. 58 trustees managing $1.6 trillion in superannuation for 19 million membersi responded to the survey and ASIC followed this with detailed preparedness checks with a small number of trustees. The respondents represented industry, retail, corporate and public-sector funds, with both internal and outsourced administration, and ranged from small to large participants
From 5 October 2021, key parts of the IDR requirements are enforceable. Recognising that these changes involve a period of transition, ASIC will take a reasonable approach in the early stages to enforcement provided trustees are using their best efforts to comply. ASIC’s attitude to enforcement will differ where there is a lack of good faith or where we detect conduct causing actual harm. We strongly encourage all trustees to consider our findings as well as the following information in finalising an effective end-to-end IDR process.
RG 271 reinforces that IDR remains the trustee’s responsibility, regardless of the fact that service providers or insurers may be involved in the day-to-day handling of complaints. We expect that trustees have a positive compliant management culture that welcomes and values complaints.
However, our preparedness checks identified that 29 per cent of the trustees surveyed had not briefed their boards on their obligations under RG 271 at the time of our survey.
This is concerning as commitment from the top is important in successfully implementing the IDR requirements. Trustee boards must ensure that sufficient resources are allocated to IDR and that they are kept informed about IDR operations as well as any systemic issues. This will need to be reflected in the organisation’s governance policies.
Trustees must set clear accountabilities for IDR functions, including thresholds and processes for identifying and reporting systemic issues.
Where trustees use external administrators to manage their IDR processes, they must have sufficient oversight and be able to show evidence that they (including their service providers) are meeting the IDR obligations for each fund. Trustees should actively turn their mind to what metrics are needed to assess complaint handling performance rather than rely on metrics chosen by their service providers.
Trustees should note, under the design and distribution obligations (that also commenced on 5 October 2021), distributors of the trustee’s products must record and report the number of member complaints to the trustee. Trustees will also need to consider the complaint insights that they receive from distributors.
We have noticed variability in the degree of member-focus currently being applied to IDR.
ASIC expects trustees to keep the fund member journey front of mind when reviewing and implementing their IDR processes. Trustees should involve specialist staff from across their business to test and review relevant aspects of their IDR process from a member’s point of view. They must ensure that information about the complaints process is easy for members to find and access.
When it comes to handling complaints, trustees need to put their members first. This requires trustees to understand the full nature of the issue raised by their fund member, and the root cause of any problems identified. This is a cultural shift away from looking at complaints through a risk or compliance lens.
In our survey, we asked trustees to share with us their main challenge or obstacle in preparing for RG 271. The most common issue nominated was consistently implementing the definition of ‘complaint’.
RG 271 adopts the Standards Australia AS/NZS 10002:2014 definition of ‘complaint’ and requires all complaints to be recorded. To comply with RG 271, trustees will need to adopt an expanded definition of ‘complaint’ and apply it consistently across all operational areas. Where trustees are relying on an external administrator in relation to complaints, care should be taken that the definition of ‘complaint’ adopted by the administrator is consistent with the trustee’s legal obligations and the level of member focus sought by the trustee.
RG 271 expressly states that objections to death benefit distributions fall within the definition of ‘complaint’. Going forward, trustees will need to integrate objections to death benefit distributions into their IDR processes, data collection and complaints reporting.
Pleasingly, some trustees have already introduced a triaging mechanism or new processes to improve their ability to comply with the new maximum timeframes for IDR responses required in RG 271.
All trustees are strongly encouraged to take an active role in analysing why some complaints take longer than 45 days and enact plans to address any obstacles as soon as possible. Additionally, they should consider the barriers and risks across their business (including in IT system constraints, resourcing or delegations) or in outsourcing arrangements, that may impact their compliance with the new timeframe requirements.
Trustees should sufficiently empower relevant staff to resolve complaints fairly and efficiently, providing them the authorisation to make decisions and appropriate financial delegations. This will assist with avoiding delays in resolving complaints under the shorter timeframes. Trustees should also consider how they can scale their resourcing when levels and complexity of member complaints fluctuate.
ASIC found that trustees’ preparation for the identification, ownership and management of systemic issues is less advanced when compared to their preparations for other RG 271 requirements.
Having the right level of focus on systemic issues includes trustees establishing a well-documented and structured approach to IDR as well as the analytics to identify such issues. They need to clearly define what systemic issues are and ensure that their staff understand what to do when systemic issues are identified.
IDR frameworks should allow trustees to:
Over 90 per cent of trustees who responded to our survey were changing their IT systems to prepare for the new IDR requirements. Many trustees and/or their external administrators appear to be using different IT systems to record complaints information across various operational areas. Trustees should consider how data from each system can be integrated or extracted to give a holistic view of complaints handling and to support the identification of systemic issues.
ASIC is encouraging organisations to scale their processes and IT systems supporting complaint management to the size and complexity of their business.
Trustees that are able to introduce sophisticated machine learning technologies should strongly consider doing so. This will be particularly helpful to check if complaints are being picked up by their contact centres and to analyse root causes, trends or potential systemic issues.
As they implement the RG 271 requirements more broadly, trustees will also benefit from considering whether their complaints systems can match the new IDR data reporting requirements, which are expected to commence later this year.
Trustees should carry out regular and ongoing quality assurance (QA) of their IDR process. This requires trustees to engage with more than complaint volumes and timeframes – this involves checking that complaint outcomes for their members are fair and consistent.
A formal QA program is most effective if it is applied across the end-to-end complaints process and the various business areas involved, such as contact centres, IDR teams, trustee office and claims teams (for claims-related complaints).
On 2 September 2021, ASIC released technical and clarifying amendments to RG 271 as a result of industry feedback. Of most relevance to superannuation trustees are the changes to:
A summary of changes to RG 271 is available here.
RG 271 contains enforceable obligations that are designed to ensure that timely and fair consumer complaint outcomes are achieved. This is the first time such obligations are included in a regulatory guide, and they are enabled by ASIC Corporations, Credit and Superannuation (Internal Dispute Resolution) Instrument 2020/98. This instrument was recently modified by ASIC Corporations, Credit and Superannuation (Amendment) Instrument 2021/753 to refer to the updated version of RG 271.
The enforceable obligations mean that ASIC can pursue civil action, potentially resulting in significant penalties, where trustees don’t comply with certain requirements in RG 271. We strongly encourage trustees not to take a ‘wait and see’ approach to compliance.
The enforceable obligations in RG 271 are clearly highlighted in special text boxes and include topics such as:
If a breach of an enforceable IDR obligation occurs, it may:
It is important to note new breach reporting requirements also took effect from 1 October 2021. This means, as an AFS licensee, a trustee must notify ASIC in writing within 30 days about any significant breach (or likely significant breach) of key IDR obligations. An individual breach of enforceable requirements in RG 271 is not deemed to be a ‘significant’ breach of core obligations, and so this does not have to be reported. However, trustees will still need to consider whether breaches of IDR requirements may be otherwise reportable under the general ‘significance’ test or other provisions, such as where the breach results in material loss to consumers.
ASIC intends to undertake surveillance of compliance with RG 271 in 2022. We anticipate specifically looking into trustees’ compliance with:
We cannot emphasise enough the importance of a sound IDR framework. IDR is an integral part of the consumer protection framework in Australia. Getting it wrong suggests broader issues in a trustee’s operating model and could result in breaches of enforceable obligations leading to serious penalties. Getting it right has the potential to greatly improve a member’s experience of a fund and contribute to building trust and confidence in the superannuation system.