APRA SPS 250 Insurance in Superannuation: trustee obligations explained

What SPS 250 is

SPS 250 outlines the obligations for RSE licensees – the trustees of APRA-regulated superannuation funds – regarding insurance within superannuation. It establishes requirements relating to how trustees select insurance arrangements, monitor those arrangements, and provide insurance benefits to members.

The standard’s purpose is to ensure that insurance provided within superannuation is appropriate and managed prudently. It complements the Superannuation Industry (Supervision) Act 1993 and other relevant regulatory frameworks.

These include:

• SPS 220 Risk Management for RSE licensees
• CPS 230 (from 1 July 2026)
• CPS 511 remuneration

Insurance strategy requirements

The trustee is required to have a board-approved insurance strategy relating to insurance in superannuation. This strategy must address several key areas, including the types of insurance offered, the levels of cover provided, eligibility criteria for insurance, the structure of premiums, the potential impact of premiums on members’ retirement outcomes, and specific arrangements for vulnerable cohorts of members.

The insurance strategy is not static; it must be reviewed at least once per year. Furthermore, the strategy must be updated when material changes occur that may affect its suitability or effectiveness.

Documentation is essential to demonstrate the trustee’s decision-making process. This documentation must clearly explain the reasoning behind decisions regarding cover levels and the potential impact on members.

Value for money + member outcomes

Trustees are obligated to secure competitive premiums and structure insurance offerings to deliver value for members. This requirement aligns with the trustee’s best financial interests duty outlined in section 52 of the SIS Act. Insurance arrangements must be designed to avoid an inappropriate reduction in members’ retirement balances.

Particular attention should be given to the impact on younger members, those with lower account balances, and members in inactive accounts, especially considering the Protecting Your Super reforms. The design of insurance should recognise the potential for disproportionate impact on these groups.

The Member Outcomes Assessment, mandated by section 52(9) of the SIS Act, requires trustees to consider both the benefits provided by insurance and the associated costs. This assessment forms a key component of demonstrating how trustees are fulfilling their obligations.

Reporting and oversight

Trustees are required to report to APRA on insurance arrangements, adhering to the Reporting Standards. This reporting obligation ensures APRA has visibility into the insurance products offered within superannuation products.

Material changes to insurance arrangements necessitate reporting within specified timeframes. These changes include alterations to the insurance provider, the scope of cover provided, and significant movements in premiums.

APRA’s supervisory reviews incorporate a focused assessment of trustee insurance arrangements. This scrutiny is directed towards evaluating value-for-money outcomes for members.