The Australian Securities and Investment Commission (ASIC) has urged superannuation trustees to change the way they apply default insurance settings after finding that many members were being overcharged.
ASIC’s Superannuation Member Experience Report found that many insurance holders were added as blue-collar workers and smokers by default, which resulted in them being charged much higher premiums.
In one case that went before the Superannuation Complaints Tribunal (SCT), a worker had been charged approximately $77,000 more than a non-smoker due to the default position, even though the member was not, and had never been, a smoker.
ASIC’s report has urged trustees to immediately stop using smokers as the default position for life cover policies, as it is no longer representative of the Australian population.
“Trustees should not presume that members smoke in determining their insurance premiums,” the report stated. “There are low levels of smoking in the community, with only 14.5 per cent of adults being daily smokers. In these circumstances, it is statistically appropriate to assume a person is not a smoker, in the absence of other information about that member or that group of members.”
ASIC Deputy Chairman Peter Kell said that he expected the Insurance in Superannuation Industry Working Group to consider the report’s findings, adding that there were also other actions underway to redress the issue of defaults.
“Inappropriate defaults can be adverse to consumers, as they are unlikely to notice the change in status that has been applied to their member account and take action to fix the issue. We are taking follow-up actions with funds about the issue of defaults,” Mr Kell said.
“We intend to make public the results of our 2017 project work. Now is the time for trustees to consider whether their practices are in the best interests of members, as well as whether their members are adequately informed of decisions affecting them.”
Has your super fund ever asked if you were a smoker or blue-collar worker? Will you investigate your insurance to see if you were charged higher premiums?