More than 5,000 Australians are due to receive refunds from their superannuation fund to the tune of $3.6 million after it was found seven funds were classifying members ‘smokers’ by default and then charging them higher life insurance premiums.
AMP, Colonial First State, Equity Trustees, IOOF (including OnePath), Intrust, Netwealth, and Suncorp were automatically categorising members as smokers in specific products. This category was dropped only if the member took active steps to opt out of it.
According to the corporate watchdog ASIC, all the superfunds have now dropped the practice of charging new members life insurance premiums at smoker rates by default.
The super funds are also moving existing members paying premium smoker rates to non-smoker rates, and four superannuation businesses have refunded extra premiums or have agreed to do so.
Insurance premiums are generally “substantially higher” for smokers than non-smokers, said ASIC commissioner Danielle Press.
“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,” she said.
Many Aussies might not realise that default classifications impact the price of their cover and reduce their retirement benefits, she added.
“Merely providing disclosure and putting the onus on members to act is not enough to support good member outcomes.”
All the superannuation trustees ASIC raised concerns with said they have now ended the practices with new members and are refunding members in part or in full.
“When planned remediation is complete, more than 5,000 members will have received more than $3.6 million in compensation.
“Trustees should ensure that members are not disadvantaged due to disengagement or inertia. I strongly encourage trustees to take into account the composition and needs of their membership and check whether their default settings for insurance coverage are reasonable,” Press said.
If you think you have been wrongly classified as a ‘smoker’, approach your super fund first. You can also contact the Australian Financial Complaints Authority (AFCA).
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