RC hears Rest acted in insurer’s benefit
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has heard that superannuation fund, Rest, acted in its insurer’s benefit, and not the benefit of its members.
The Commission was first told that the super fund, represented by service delivery manager, Lachlan Ross, had a policy whereby it relied on the employer or employee to notify the fund of any changes to the employee’s status, particularly if they were to cease employment.
“That’s not very realistic, is it, Mr Ross?” asked Senior Counsel assisting, Mark Costello.
The Commission was taken through a case study involving a young member who worked at McDonald’s, and subsequently became a paraplegic when she was no longer with the fund.
Rest notified the member that she had $180,000 worth of total and permanent disability insurance coverage, but only in fine print did it mention she was required to notify the fund of her employment status.
Rest subsequently took over six months to refer the member’s case to their group insurer, AIA, which was well in excess of the five days prescribed by the relevant voluntary industry code.
The Commission heard that the fund failed to check the member’s employment status, and was in fact notified by its external administrator, AAS, that the member was excluded from coverage.
“In this instance, rather than doing the work of pursuing the claim for the member, AAS [the external administrator] identified an error to the possible advantage of the insurer,” said Costello.
Ross said that was an “appropriate” way for the administrator to behave, to which Costello posed that it was a “contradiction” for the trustee to review the claim when the trustee was to identify the basis on which the claim would be denied.
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
