Insurer carries cost of unreasonable delay

A recent determination by the Superannuation Complaints Tribunal (SCT) has served as a reminder to superannuation funds and their insurers that they cannot unreasonably delay the payment of a death benefit.

The SCT determination saw an insurance company required to pay interest of over $15,000 on a $400,000 death benefit, when it was held that it had unreasonably delayed payment to a deceased members' beneficiaries while checking whether the man had fraudulently failed to disclose an illness when requesting an increase in his level of insurance cover around a year earlier.

The SCT held that the insurer should have accepted the confirmation of the member's treating general practitioner that the diagnosis of the illness had first been made a year after the increased cover had been agreed.

The determination stated that, in the context of the standard of proof, set down in the Briginshaw Test for establishing fraudulent non-disclosure, "the tribunal concludes the letter (from the treating GP) was sufficient for a reasonable insurer to conclude that no fraudulent non-disclosure had been perpetrated by the deceased member".

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"The fact that the insurer persisted in its interrogatory efforts thereafter cannot be considered reasonable," the SCT determination said.

The SCT ordered the insurer to calculate the interest which had accrued as a result of the delayed payment and to pay the amount to the superannuation fund. It further required that the superannuation fund check the insurer's calculations and then pay the beneficiaries.