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Super funds charged extra premiums after default ‘smoker’ classification
Seven superannuation businesses have been found to have been charging extra premiums after classifying new members as ‘smokers’ by default, according to the Australian Securities and Investments Commission (ASIC).
ASIC found that between 2017 and 2020, AMP, Colonial First State, Equity Trustees, IOOF (including OnePath), Intrust, Netwealth, and Suncorp had been assigning ‘smoker’ status to members in specific products unless the member took active steps to opt out of the categorisation.
Following engagement with ASIC:
- All seven superannuation businesses stopped charging new members life insurance premiums at smoker rates by default;
- All seven superannuation businesses moved, or are in the process of moving, existing members paying premiums at ‘smoker’ rates by default onto non-smoker or blended rates; and
- Four superannuation businesses refunded or agreed to refund members for the extra premiums paid because of the default ‘smoker’ classification (refer Summary of remediation).
ASIC commissioner, Danielle Press said, “Generally, insurance premiums for smokers are substantially higher than for non-smokers. Given the low prevalence of smoking among Australian adults, classifying members as ‘smokers’ for insurance offered through superannuation unless the member takes active steps to confirm non-smoking status is contrary to community expectations.
“Insurance in super is complex. Many Australians may not realise that default classifications can impact the price of their cover and therefore, reduce their retirement benefits. In light of the low smoking rate, merely providing disclosure and putting the onus on members to act is not enough to support good member outcomes.
“All trustees we raised these concerns with have ended this practice with new members. Many have decided to refund affected members, in part or in full, for the higher insurance costs. When planned remediation is complete, more than 5,000 members will have received more than $3.6 million in compensation.”
ASIC said if members believed they had been inappropriately classified as “smokers” they should approach their fund, or could contact the Australian Financial Complaints Authority for dispute resolution if they had complaints.
| # | Entity | Trustee(s) | Superannuation fund(s) | Date ceased defaulting members | Date members transferred off smoker default rates | Number of identified affected members | Refund amounts |
| 1 | AMP | AMP Superannuation Ltd | AMP Superannuation Savings Trust | 4 June 2006 | In progress | 3,492 | No remediation |
| NM Superannuation Proprietary Limited | Wealth Personal Superannuation Pension Fund | 17 August 2012 | 25 March 2020 | 14 | |||
| 2 | CFS | Colonial First State Investments Limited | Colonial First State FirstChoice Superannuation Trust | 1 February 2018 | 1 February 2018 (FCES) 15 October 2019 (FCPS) | 3,894 | Partial remediation of $2.97 million |
| 3 | Equity Trustees | Equity Trustees Superannuation Limited | AMG Super | 17 December 2019 | 17 December 2019 | 65 | Partial remediation of $34,507 |
| 4 | IOOF | IOOF Investment Management Limited | IOOF Portfolio Services Superannuation Fund | 30 June 2014 | 1 January 2020 | 350 | No remediation |
| OnePath Custodians Pty Limited | OnePath MasterFund | 17 March 2018 | 17 March 2018 | Approx. 146,000 | |||
| 5 | Intrust | IS Industry Fund Pty Ltd | Intrust Super | 31 January 2020 | 31 January 2020 | 36 | Full remediation of $29,316 |
| 6 | Netwealth | Netwealth Investments Limited | Netwealth Superannuation Master Fund | 1 January 2017 | 1 December 2019 | 1,046 | Full remediation of $598,365 |
| 7 | Suncorp | Suncorp Portfolio Services Limited | Suncorp Master Trust | 5 May 2017 | 1 February 2020 | 1,573 | No remediation |
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