In December 2022, ASIC released two reports regarding internal dispute resolution (IDR) processes and superannuation trustees:
- Report 751 Disputes and deficiencies: A review of complaints handling by superannuation trustees (REP 751), which outlines ASIC’s findings on compliance by a selection of trustees with enforceable obligations in Regulatory Guide 271 Internal dispute resolution (RG 271); and
- Report 752 Review of written responses to superannuation complaints (REP 752), which summarises the findings from an evaluation conducted for ASIC by Susan Bell Research of a sample of responses to general superannuation complaints issued by a selection of trustees.
These reports would have been easy to skip over in the pre-Christmas rush. However, they highlight a number of areas where ASIC considers that many trustees need to make improvements to their IDR processes as well as ASIC’s recommendations for how to improve.
This article provides an overview of ASIC’s expectations and recommendations.
ASIC’s general expectations
ASIC expects all trustees to use the information in REP 751 to assess their own IDR process, looking at their compliance with legal obligations in RG 271 and how complaints can be used to drive improvements for all members.
At a minimum, trustees should consider whether they have effective, fit-for-purpose arrangements and resourcing for:
- responding to complaints on time, particularly those that need a written response;
- ensuring responses to complainants contain the right information and can be easily understood;
- learning from complaints to detect systemic issues and make improvements; and
- ensuring internal reporting to the board (or equivalent) and senior management for monitoring IDR contains information that will allow them to properly understand if IDR performance is deficient.
ASIC also expects trustees to take active steps to address areas they identify as needing improvement.
Timeframes for handling complaints
RG 271 prescribes a maximum timeframe of 45 calendar days to issue a written IDR response for a trustee complaint that is not an objection to the distribution of a death benefit (general superannuation complaint). REP 751 states that a trustee needs to take proactive steps to ensure that complaint responses are only sent late when there is genuine complexity or circumstances beyond the trustee’s control.
ASIC also states that all trustees should have practical processes and controls in place to detect and address issues causing delays when they are dealing with complaints.
In addition, trustees must comply with the requirement to issue IDR delay notifications and should strengthen their practices to ensure this occurs. In ASIC’s view, controls supporting the requirement to issue IDR delay notifications should be automated where possible.
REP 751 states that in all IDR delay notifications trustees must explain why they are taking longer than expected and cannot respond to the complainant within the maximum response timeframe. ASIC continues that trustees should follow this up with their staff or service providers, enhance the template used to create IDR delay notifications, and ensure training on this requirement occurs.
Management of systemic issues
In REP 751, ASIC notes that trustees should implement fit-for-purpose oversight of systemic issues to indicate they are serious about learning from complaints to better serve beneficiaries and comply with legal obligations.
ASIC also reminds trustees that it is an enforceable requirement in RG 271 to regularly analyse complaint data to identify systemic issues. REP 751 states: “It is not good enough to only have a documented process saying this will be done—it needs to occur in practice”.
To assist trustees, ASIC provided the following tips for analysis of complaint data:
- use artificial intelligence/machine learning to identify possible systemic issues from complaint data;
- liaise with service providers to ensure monthly analysis of complaint data and findings are reported to the trustee; and
- present findings to a complaint governance forum where actions are assigned to address underlying issues.
The report states that issues that could be systemic should be identified and investigated to give trustees the valuable opportunity to quickly address problems affecting their members. ASIC warns that a failure to investigate and resolve systemic issues in a timely manner raises questions about whether a trustee is ensuring financial services are provided efficiently, honestly and fairly.
Standards for effective complaint management
RG 271 contains an enforceable standard that reports about complaints data must be regularly provided to senior management and the board (or equivalent).
In REP 751, ASIC explains that reports about complaints data should include sufficient data to identify if IDR performance (including by service providers where a trustee outsources some or all of their IDR process) complies with RG 271 enforceable requirements.
The report also sets out ASIC’s expectations regarding complaint management culture. Specifically, ASIC expects all trustees to embed a culture that views complaints as a valuable opportunity to resolve problems for members and improve their products and services.
REP 751 states that trustee processes should not implicitly or explicitly suggest or require complaints to be in writing as that creates disincentives for members to make a complaint and does not meet accessibility standards.
In the report, ASIC provides guidance in relation to the resourcing of a trustee’s IDR process. Specifically, ASIC states that investment in resources, processes and systems for a compliant IDR process is necessary if a trustee is to meet its legal obligations. ASIC also notes that where enforceable requirements are not being met, trustees should review how their IDR processes are resourced (including by any service provider) and take prompt steps to fill any resource gaps.
ASIC emphasises that a trustee cannot opt out of compliance with the law based on a conclusion that it is in the best financial interests of fund members to do so. In addition, ASIC recommends that trustees should proactively and regularly review IDR resourcing.
Content of written responses to complaints
RG 271 sets out minimum content requirements for IDR responses, including informing complainants of their right to take the complaint to AFCA if they are not satisfied with the IDR response and the contact details for AFCA. In relation to these requirements, ASIC’s view in REP 751 is that it is better practice to include the required information about AFCA in the body of an IDR response, rather than an attachment.
ASIC also provided guidance regarding reasons for decisions in written IDR responses. In ASIC’s view, it is best practice to explain the basis for the decision on a complaint in all cases. This is despite the requirements in RG 271 around including written reasons only being enforceable if some or all of a complainant’s issues are rejected. Further, ASIC emphasises that comprehensive reasons must be included in responses to death benefit distribution complaints.
Seven recommendations to improve IDR responses
In addition to the above, REP 752 contains the following recommendations to help trustees and financial services providers more generally to improve written responses to complaints:
1. Design templates for different circumstances
The report observes that members of superannuation funds complain about a wide range of topics. As a consequence, the template used for the IDR response needs to be flexible enough to accommodate the wide variety and complexity of the issues raised by complainants.
The report recommends that trustees consider using appendices and attachments to provide necessary complex or detailed information so that the body of the letter clearly tells the reader the outcome and next steps.
2. Make the letter or email easy to read
The report recommends that trustees follow the advice on accessibility and literacy provided by the Australian Government Style Manual when writing to the general public and aim to write for someone with Year 7 education.
The report observes that letters and emails that are easy to read have these characteristics:
- short sentences in short paragraphs;
- one topic per paragraph;
- the body of the letter or email is short; and
- detailed timelines and process descriptions (if needed) are in an appendix or attachment.
3. Write for a broad audience
The audience for an IDR response primarily comprises superannuation fund members who vary in their knowledge of the language of superannuation, investments or insurance. Given this audience, it is recommended that trustees:
- do not write to members using language that only professionals would understand; and
- avoid quoting large paragraphs in technical language directly from the insurer’s response, insurance policy or a disclosure document unless they can be sure that the language will be familiar to their audience, and it is well-formatted for ease of reading.
4. Make high value information stand out
It is recommended that high value information (information that the complainant wants or needs), is provided early in the letter. Examples of high value information include:
- whether or not the trustee has accepted the complaint;
- steps that the complainant needs to take to complete the process; and
- next steps that the complainant can take if they are unhappy with the trustee’s response.
To achieve this, the report suggests that the letter to talk more about the customer than the trustee and have separate headings or sub-headings for the complaint outcome and for the call to action.
5. Keep the body of the letter short
The report observes that people are more likely to read all of a short letter than a long letter, and includes the following ways to shorten letters:
- using attachments and appendices;
- reconsidering how much information the complainant actually needs in the letter; and
- using a less wordy writing style.
Writing short letters will also benefit trustees because the complainant can see and understand the information the trustees need them to know or act on.
6. Be accountable
An effective IDR response means that a complainant can understand the outcome of their complaint and the reasons for the outcome.
To clearly explain the outcome, the report suggests that trustees must be open about their own mistakes and delays. REP 752 states that this requires more than a generic apology about “any inconvenience caused” and means telling the truth in a way that people who have complained can understand. To do this, the report recommends that trustees:
- use active voice for errors, mistakes and delays that they cause (e.g. “We made a mistake when we…”); and
- place that information after information about the status of the complaint.
7. Resource appropriately
The report states that staff training is very important for IDR responses as responses to complaints are complex letters to write. Further, it recommends that trustees allocate time for proof-reading and peer review within the maximum timeframes for issuing IDR responses set out in RG 271.
ASIC’s next steps
ASIC has indicated that it will continue to monitor whether trustees comply with requirements and standards set out in RG 271 and will consider the full range of regulatory tools available (including enforcement action) where it identifies non-compliance.
In addition, the IDR data reporting framework is being implemented this year. A group of 11 large financial firms were required to report IDR data to ASIC for the first time by 28 February 2023. The remainder will join the framework and be required to report IDR data to ASIC by 31 August 2023. From that point, all relevant financial firms will need to report IDR data to ASIC every six-months on an ongoing basis.
G+T has the knowledge and expertise required to assess your IDR process as recommended by ASIC, to review templates for responding to complaints and to advise regarding legal obligations in RG 271. If interested, please contact Phil Turner.