SCT flays super fund over insurance

A superannuation fund which failed to inform a member that his default insurance cover had been cancelled because of insufficient funds to meet the premium has been required to pay his daughter $176,000.

In a determination (D16-17\123) handed down in January, this year, the Superannuation Complaints Tribunal (SCT) pointed to multiple shortcomings on the part of the superannuation fund ahead of the member’s ultimate death.

The SCT determination said that from the information provided, the tribunal was satisfied that the trustee failed to:

  • Provide the deceased member with a product disclosure statement (PDS) at or before the time he joined the fund or within three months of joining the fund;
  • Inform the deceased member he was a member of the fund and had been provided with basic cover;
  • Provide the deceased member with information about the cost of insurance and the option to elect what component of insurance he wanted;
  • Advise the deceased member that there were insufficient monies in the account balance to pay for basic cover premiums;
  • Inform the deceased member that basic cover was cancelled at any time;
  • Inform the deceased member what choices he had in relation to maintaining insurance cover once basic cover had been cancelled; and
  • Make any attempts or reasonable attempts to obtain the address of the deceased member, so the PDS, relevant information and notices could be sent to him.
Related News:

The tribunal said that having carefully considered the material it had determined the deceased member, “at the very least, had a reasonable expectation that the cancellation of basic cover would have been communicated to him by the trustee within a reasonable period of time of its occurrence and by failing to so do, the trustee has engaged in circumstantial silence”.

Referring to a letter sent to the member about the commencement of his cover, the SCT determination said: “In this regard, the dissemination of the letter dated 6 September 2012 by the trustee, knowing as it did, that the totality of the deceased member’s insurance status and future insurance status was in fact overstated, only goes to further establish this fact,” the determination said. “The obligation of the trustee not to engage in misleading or deceptive conduct, in its formal interactions with the deceased member, goes to the very heart of the fiduciary obligations it owed to him.”

Related Content

Insurance code compliance committee flagged

The insurance in superannuation code of practice is likely to be overseen by a Code Compliance Committee with audit and sanction powers, according to ...more

TAL insists profit sharing rebates go back to fund members

Australia’s largest group life insurer has insisted to a Parliamentary Committee that any profit-sharing rebates it pays to superannuation funds hav...more

Highest living cost increase for those at modest retiree lifestyle

The retiree budget for those living a modest lifestyle has increased by 2.1 per cent leaving them to suffer the greatest cost imposts in retirement, a...more



Add new comment