Watchdog goes after super funds on junk insurance

ASIC says funds are failing to comply with a new code of conduct.

Watchdog goes after super funds on junk insurance

Kenneth Hayne’s financial services royal commission put a broom through the industry, right? So why is the corporate watchdog now preparing to prosecute some of Australia’s biggest superannuation funds and pursuing CommBank’s insurance arm?

The Australian Securities and Investments Commission (ASIC) has found funds have already failed to comply with a new code of conduct aimed at limiting insurance fees, and says these fees are eroding retirement savings.

ASIC has sharpened its teeth post royal commission and is promising “tough and uncompromising” action. This is evidenced by its pursuit of CommInsure, which has been charged with “hawking” for trying to sell insurance products through unsolicited phone calls. CommBank is facing 87 criminal charges relating to CommInsure, which has been sold to Hong Kong-listed AIA Group.

In confidential meetings with major superannuation lobby groups, ASIC has restated its concerns about the value consumers get from default opt-out insurance, about the length of time it takes for claims to be processed and the rejection rate for total and permanent disability insurance claims.

The Australian says ASIC has warned it will be “highly critical” of superannuation trustees that use an “Activities for Daily Living” (ADL) definition for insurance policies to deny otherwise legitimate claims.

The definition reportedly contains a legal loophole that allows insurers to reject claims for workers who have been made totally and permanently disabled, so long as the claimant hasn’t lost limbs or sight.

A world-first data project conducted by ASIC and the Australian Prudential Regulation Authority (APRA) found that almost one in three people with a total and permanent disability policy through Suncorp’s super fund had had their claim denied. This was double the industry average.

Hong Kong insurance giant AIA Group, one of the largest insurers for super funds, knocked back almost one in five disability claims, The Australian reported. And it took Westpac almost nine months to process disability claims.

ASIC will also target super funds that take a long time to review an insurer’s decision, “for example, due to infrequent board or committee meetings”.

“ASIC expects trustees to take a more active role throughout the claims process, from claim lodgement to decision review and possible complaint,” The Australian reports.

About 12 million Australians hold insurance – for life, total and permanent disability, and income protection – through their super fund. About 80 per cent of policies provide the cover automatically.

Insurance premiums collected by the industry reportedly jumped 35 per cent in the three years to 2017, and total more than $9 billion a year. The Productivity Commission found that hefty life insurance fees could reduce the retirement balances of low- and middle-income workers by $85,000 to $125,000 over a lifetime.

New legislation gives watchdogs the power to take civil penalty action against super trustees for breaching their obligations to members, including the duty to act in members’ best interests.

Superannuation Consumers Centre acting director Xavier O’Halloran says some life insurance policies sold by default as part of people’s superannuation are failing to protect people and their families.

“Life insurers and super funds have been treating our insurance like a magic pudding, hollowing out policies to give them a veneer of affordability,” he said.

“To date, there has been no holistic approach to figure out the needs of people who can no longer work due to disability. Instead we’ve had a mix of overlapping public and private schemes with no thought to what is the most efficient and, importantly, equitable way to look after people.”

Do you have a life insurance policy with your super fund? Do you believe you are getting value for money?

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    COMMENTS

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    8th Oct 2019
    10:48am
    Can I just in set my comment on the worries I have with these type of actions. Firstly i have the opinion that ASIC and other public money funded establishments such as ACICgenerate these matters to justify their own existence. We presently, and for years have this obsession for targeting Banks (the big 4) and Superannuation industries as they are easy targets and sentimentally elevated as the big industry, easy targets, ripping off the consumer and older and retired people. They are an easy target for all levels of Government to hi-light. with the sole purpose of directing attention away from the appalling efforts all levels of Government have in ripping off the same age limit people. The Government is the one lowering the interest rates to curtail most income that old people have. The Government has also ruthlessly continued to lower the asset levels and income levels as qualifying levels for pensions.

    I am making this comment to alert governments that all people are not as dumb as they think.

    Lessons one, two and three. Fix your own incapabilities before inventing incapabilities in other organisations. Cease creating issues to justify existence, and above all remember you are the ones reducing the share and productivity prices of Banks, upon which most self funded retirees depend.

    Above all put interest rates up to lower the price of houses, and to cease attempts to artificially management the economy, rather than increase our productivity and reducing foreign ownership from Countries that in reverse do not allow foreign ownership.
    Anonymous
    8th Oct 2019
    11:08am
    Oh and that's right, when you have attended to these matters please look at immigration and gender preference that overwhelmingly, no that would be, and singularly favour women.
    TREBOR
    8th Oct 2019
    11:52am
    While I agree with you to some extent, they have to start somewhere,and the 'halo effect' of taking on the Big Boys should start to bring the little thieves into line 'voluntarily'.

    You are right - the current economic model is flawed and frankly silly and short-sighted - a solidly based economy is what is needed, not constant manipulation of figures in some mythical land called Serviceindustry.

    "That's what it's called, Don-kay - SERVICEINDUSTRY!! And NO - we are not there yet!"

    As for preference etc and discrimination (the ageism, racism, and sexism cards played so freely by those who benefit from them) these belong on the scrapheap of social history, and the Land of The Fair Go for ALL needs to be resurrected...
    Lookfar
    8th Oct 2019
    12:20pm
    I don't know Gilham, the number of accounts I have come across of folk being ripped off, I feel the banks have got off lightly, - in fact many should be in Goal.
    You should be glad we have these watch-dogs to stop blatant thieving, - do you believe they should be allowed to rob where they will with no let or hindrance?
    If indeed you are not as dumb as they think, you should be aware that the current Govt. party follows a belief system, (neo-Liberalism) that maintains there should be no social system, no pensions, roads, schools hospitals, etc, unless you pay for them through the teeth!
    It might also be a bit naive, if not dumb, to think that allowing foreign corporations to invest in Australia is still necessary, even though it was after WW2, now they just come in and buy up local companies, reduce the OZZie percentage of staff and fiddle their books to avoid paying any tax. - Whyever should we need these greedy parasites?
    Times have changed, we have to change also or we will be ground under and reduced to penury, and times have also changed as regards your hatred of women and 'furrenors'.
    Anonymous
    8th Oct 2019
    1:30pm
    Well 'LOOKFAR', the point is, hatred of men has not changed. Under 'furrenors' if you lik. And the hatred of men by women and Society is entertainment.Please advise me of one quota initiative that is in place to advance males where they suffer. ie education and quota job appointments. Even ridicule roles of men in TV advertisement. The mental impact on young males is significant in the they are raised in the education system to understand that their male culture is the low point in our culture. And if you watch the Kenny Report, male character is the subject of enforced extinction. A mirror image return of the poor Society endorsed attitude towards males is banned. And thank you for confirming that endorsement.

    Regarding the attacking of Superannuation and Banks by tax payer funded bodies such as ASIC, if you cannot see the targeting by Government bodies is not diversionary distraction and shifting of blame to to avoid Government self accountability, then you cannot see self 'nativity' either. However there is some of us who can see the diversion. This is a Government driven diversion and distraction.
    Anonymous
    8th Oct 2019
    1:45pm
    And just to confirm, the Banks and the Super funds are to blame for everything. Not the Government. What a thinly disguised and transparent cop out.

    And "Lookfar" please, your second para is nothing other than Communism and Socialism. Both of which we can do without. But the pure 'leftist' ideology that someone else pays, which is also the basis of feminist ideology, is also devoid of accountability.

    Superannuation, and payment for your continued living expenses responsibility should be mentally identified from a young age. Hence i am a self funded retiree, from my own self accountable attitude through my working life. No pension, no Government concessions other than Opa, and still pay tax. Doesn't make me rich, just self accountable. But overall I am totally sick of, not the finances matters, but the pillory of my gender, starting from a young age through the education system. That includes the education outcomes through gender targeted idealism in your wonderful Socialism which sees girls dominate University entrance qualification all through a stacked deck. I want 'equality'. Not preferences to one over the other.
    TREBOR
    8th Oct 2019
    6:48pm
    It isn't 'hatred' of anyone to discuss current issues of unfair treatment ....... unless a free and open discussion is permitted (touches forelock to the learned academics - )word for today ... "Acidemics" - academics with a vitriolic tongue) .. by yer leave m'lod, m'lady - youse know it all) no valid result can be achieved.

    Limiting discussion to only those who are current beneficiaries of this system of advantage/disadvantage (based on who knows what) will only perpetuate wrong when it is and has been done.

    "One guarantee of a free and open society is a free exchange of information" - JFK - now he really meant 'free exchange of views, since obviously there are limits on information that may be shared...
    Misty
    9th Oct 2019
    2:18pm
    Who would believe anything the Kenny Report says, Chris Kenny has his own agenda and not everyone agrees with it.
    TREBOR
    8th Oct 2019
    11:46am
    Another clear example of the failure of the 'privatised corporate business model' (which includes industry super funds though their behaviour is ameliorated somewhat by their lower fees structures, though their basic organisation is the same) to produce the advertised results.

    'Greed is good' is not good for the majority of sincere, honest investors (compulsory or not - still a need to reside trust)... and there are too many vultures out there who think that OPM is all theirs to do with as they choose, and on top of living off it, they deserve a huge salary and bonuses for handling it.

    Bring on The Trebor Scheme... a one-shop stop for all super under the same rules and conditions... (that'll slow down a heap of the parasites) ...
    Horace Cope
    8th Oct 2019
    12:13pm
    The questions are: "Do you have a life insurance policy with your super fund? Do you believe you are getting value for money?"

    Insurance associated with a super fund should have the default position as "opt in" rather than "opt out". Firstly, not everyone wants a life insurance policy and, secondly, the policy that I was offered was "just $1pw" and covered me for the princely sum of $5,000. Checking around with insurance companies disclosed that to get a life policy for $5,000 I would need to pay about $0.49¢ per month.
    debs
    8th Oct 2019
    1:46pm
    I have an issue with 2 funds i was in
    ** Hesta (joined by an error by the pay office) used the $500 it had collected by the time i realised the mistake for fees!!
    ** MAPfunds which i was in for many years was charging more in fees than i was earning AND lost over $20,000 in the GFC
    Anonymous
    8th Oct 2019
    2:31pm
    What, is that a lady who did not negotiate her fees. It can be negotiated down to zero management fees. They make enough from their utilisation of your money that it far exceeds their fees, hence they are willing to negotiate. But there you are, another female play of the victim card. Be responsible for yourself rather than relying on entitlements for 'protected species'.
    Captain
    8th Oct 2019
    5:25pm
    Gilliam, as I have said in this forum and others, it is both male and females that need to take responsibility for their own future. That means they should at least take an interest in any superannuation fund that funds are being contributed to.


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