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When Super Funds are a Little Like Insurance Companies
Two recent decisions show how the Superannuation Complaints Tribunal can be used to remedy harsh, unreasonable and unfair decisions of superannuation funds.
In the first decision the employee had become a member of the superannuation fund in 1995. A later employee sent the fund incorrect information with the wrong date of birth and gender, and a different address for the member. The superannuation fund then opened a second account in the member’s name. In July 2011 the member supplied information matching the accounts. Because of the deductions from the separate accounts the member’s death insurance lapsed in December 2011. The member died 3 months later. The fund denied payment of death insurance to the member’s dependants and beneficiaries worth $230,000.00.
The Superannuation Complaints Tribunal decided that the fund had information that meant the accounts should have been merged, and that if they had been merged there would have been sufficient money to provide the life insurance premiums up to the member’s death. The Tribunal decided that the fund’s decision to decline payment of the insurance benefit was not fair and reasonable in the circumstances. It ordered the fund to pay the insured benefit less certain deductions.
The background to the second decision was that a member lodged a TPD claim which was approved. The fund sent the member his full entitlement from the fund. The accompanying letter stated that the member’s death benefit entitlement had ceased. The member received ongoing payments and during that time was erroneously advised by the fund that those payments triggered further death insurance cover. The error was not identified until after the member’s death when his spouse lodged a claim for the death benefit. The fund denied payment.
The Tribunal decided that the fund pay the death benefit plus interests because I was satisfied that that was fair and reasonable in the circumstances. The Tribunal said that the absence of a legally enforceable entitlement to death benefit under the terms of the insurance policy did not relieve the fund of its obligation to consider all aspects of the claim. Upon doing so the Tribunal found that the fund had an obligation to compromise the claim in an amount equivalent to the benefit.
This outcome of these 2 decisions demonstrates an important difference with an application to the SCT as neither decision may have been reached if the fund’s decision had been challenged in court.
