A cry for effective member engagement

7 min read
7 min read

How effectively trustees engage with their members over the fund’s insurance offering has become increasingly important with the introduction of the Protecting Your Super regime – as this legislation requires the cancelling of cover in certain circumstances.

In this edition of Super Verdict we review two decisions of the Superannuation Complaints Tribunal (Tribunal), with one member complaining about the loss of cover that was cancelled in accordance with fund rules designed to protect low account balances from erosion while the other member complains about the ‘excessive’ cost of the insurance, and wanting the premiums refunded. Clearly, truly effective engagement with members who don’t have a financial adviser is a number one industry issue!

Case 1

The fund in question was one of the public sector schemes where members had a hybrid benefit structure combining both defined and accumulation style benefits. A feature of the accumulation side of the fund rules was two units of death and total and permanent disablement cover. In 2016 the fund’s insurance rules altered with cover ceasing when the accumulation account balance dropped below $5,000, and no contributions had been received in the past 12 months. If members wanted cover to continue, they were required to opt into permanent cover which was not subject to the safety net rules. The trustee provided members with written notice setting out the new insurance terms.

The member’s cover was cancelled and reinstated a number of times and there was a string of letters and emails between the member and the trustee with the result that none of the facts were in dispute.

On 19 October 2016, the member called the fund and requested her cover be reinstated and she confirmed this by email the following day. On 1 December a letter was sent to her home address confirming the reinstatement of cover and advising the premiums would be backdated (Reinstatement letter).

Inexplicably twelve days later an email was sent to the member’s work email address advising her that cover would be cancelled in less than a month. An automated response was generated from her inbox saying she was on leave until March 2017. In both January and February, the trustee emailed the member at her work address and advised her cover had been cancelled. Again, the inbox generated the – I am on leave until March 2017 message.

On 6 February 2017 the member’s husband emailed the trustee acknowledging the receipt of the Reinstatement letter and requesting information as to what steps to take to ensure cover continued. It became clear he had not received any notice about the second cancellation of cover as his wife was not checking her work emails while on leave. On 8 February the trustee received the completed opt into permanent cover form dated 6 December 2016. Soon afterwards an ’it’s all sorted‘ letter was sent to the member. The delay in replying to the reinstatement letter was due to the member’s iil-health over the Christmas period.

On 26 May 2017 the member’s husband was advised over the phone that cover had once more been cancelled effective 14 January 2017, but that the trustee would investigate what could be done. On 5 June the husband was advised that cover wouldn’t be reinstated, and this was confirmed by letter two days later. The letter informed the member she would need to reapply for cover and be subject to the insurer’s underwriting rules. The insurer decided to not provide insurance cover as it was “definitely outside the[ir] risk appetite”, given the health of the member.

The Tribunal noted it was bound by the insurance policy terms as determined in AIA Australia Ltd v Lancaster [2017] FCA 962. It was held that while the member’s intentions were known by the trustee she had, as a matter of fact, failed to complete the opt-in form prior to the second cancellation of her cover. Her cover was validly cancelled in accordance with the fund’s safety net rules. The terms of the policy did not require the insurer to reinstate the cover, so its decision was fair and reasonable in the circumstances. Further, the trustee had neither the power to reinstate the cover nor the right to direct the insurer to do so. In these circumstances, the trustee’s decision to agree with the insurer was fair and reasonable. In coming to this determination, the Tribunal noted the efforts taken by the trustee’s staff to have cover reinstated. In other words, the trustee had acted fairly and reasonably.

Case D18-19221

Case 2

The member joined the fund in 1998 whereupon he received death and total and permanent disablement (TPD) cover of $40,000 for $1.50 a week.

In January 2012, the member applied for “tailored” fixed death and TPD cover of $200,000 (that is, the cover did not decrease as his age increased), and income protection cover of $2,500 a month. The insurer accepted the application but categorised his occupation as ‘hazardous’. The weekly insurance premium jumped to $113.32.

Insurance premiums increased significantly in 2014 and so the trustee sent the member a comparison table showing the current cost of his insurance and what it would become from 1 July. It was about twice the cost.

When the member received his 2015 annual statement he noticed that the cost of his insurance was $17,000.67. He complained saying he had never received any information about the increased costs and that this had wiped out his account balance. The trustee pointed out that it wrote to him before the increase took place in 2014, and that both his 2014 and 2015 member statements disclosed the premium amount and advised him to contact the fund if he wanted to review his insurance cover. But the member was upset and asserted “…these fees are disgusting. There is no way I would have agreed to these premiums.”

The Tribunal noted that the insurance guide (called the Solutions Guide) applicable when the member applied for tailored cover stated – “… All of your cover will convert to a premium based on your occupation classification. This means you will pay a different premium to the premium you previously paid, for the same amount of existing cover, because of your occupation.” The guide also explained the difference between fixed cover and fixed premium cover (with the latter being where the insured amount general decreases with the member’s age). In applying for tailored cover, the member declared he had received, read and accepted the accompanying ‘Solutions Guide’.

The Tribunal held that, on the balance of probabilities, the member had received correspondence from the trustee over the years posted to his home address. The member’s own evidence suggested he was reading the various statements, letters and significant event notices when making his complaint. The member’s assertion he had not received various communications was rejected. The Tribunal also held that is was clear the member had applied for, and was granted, tailored cover and that the trustee had always kept the member fully informed of the weekly cost, and that he could change to a different insurance arrangement should he so wish. In these circumstances the Tribunal agreed that the trustee’s decision to not refund the premiums was fair and reasonable.

Case D18-19219

Authors’ comment

The Protecting Your Super regime has seen the introduction of opt-in insurance laws for members who have inactive accounts, and so the issue of truly effective member engagement and how to achieve this is at the forefront of industry minds.

The issue is further compounded by the recently passed Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 which seeks to implement additional provisions making insurance opt-in for members under age 25 and low-balanc
e accounts (that is, less than $6,000).

Whilst the issue of member engagement is a matter that superannuation trustees continually grapple with, these insurance changes and the potential for members to be unwittingly left uninsured as a result of ineffective member engagement, makes the engagement issue even more acute.

Picture of By Clayton Utz

By Clayton Utz

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Derek Thompson

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Best Selling Author, Podcast Host of 'Plain English'

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In his paradigm-shifting #1 New York Times bestseller, Abundance (co-written with Ezra Klein), this award-winning journalist reveals how our policies and culture have pushed us into a world of scarcity (not enough housing, workers, or progress)—and offers a radical new path towards a world where housing is affordable, energy is plentiful, and innovation flourishes across industries.

He shares a compelling vision of a future where we have more than enough for everybody, and a practical, actionable roadmap for how to get there. It starts with taking more risks, building more expansively, and recognizing that we all have the power to create a world of abundance. “Everything’s utopian until it’s reality,” he says.

Carmen Beverley-Smith

Executive Director - Superannuation, Life & Private Health Insurance, APRA

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Carmen joined APRA in March 2023 and holds the role of Executive Director, Life and Private Health Insurance and Superannuation.  

She has had an esteemed career in financial services, spanning over 25 years. She has held diverse leadership roles at Westpac and Commonwealth Bank of Australia, including across risk, transformation and change, product and portfolio development, and sales and service. 

Prior to joining APRA, she held the role of General Manager, Risk Transformation Delivery Integration at Westpac. This involved leading the group-wide implementation of a suite of solutions to uplift risk management capability and develop data, analytics and reporting. 

Carmen leads with a values-driven approach and a particular interest in developing and mentoring talent. 

She holds a Bachelor of Commerce and Accounting, is a certified Chartered Accountant and a Graduate of the Australian Institute of Company Directors. 

Amy C. Edmondson

Novartis Professor of Leadership and Management, Harvard Business School

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Amy C. Edmondson is the Novartis Professor of Leadership and Management at the Harvard Business School, a chair established to support the study of human interactions that lead to the creation of successful enterprises that contribute to the betterment of society.

Edmondson has been recognized by the biannual Thinkers50 global ranking of management thinkers since 2011, and most recently was ranked #1 in 2021 and 2023; she also received that organization’s Breakthrough Idea Award in 2019, and Talent Award in 2017.  She studies teaming, psychological safety, and organisational learning, and her articles have been published in numerous academic and management outlets, including Administrative Science Quarterly, Academy of Management Journal, Harvard Business Review and California Management Review. Her 2019 book, The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth (Wiley), has been translated into 15 languages. Her prior books – Teaming: How organizations learn, innovate and compete in the knowledge economy (Jossey-Bass, 2012), Teaming to Innovate (Jossey-Bass, 2013) and Extreme Teaming (Emerald, 2017) – explore teamwork in dynamic organisational environments. In Building the future: Big teaming for audacious innovation (Berrett-Koehler, 2016), she examines the challenges and opportunities of teaming across industries to build smart cities. 

Edmondson’s latest book, Right Kind of Wrong (Atria), builds on her prior work on psychological safety and teaming to provide a framework for thinking about, discussing, and practicing the science of failing well. First published in the US and the UK in September, 2023, the book is due to be translated into 24 additional languages, and was selected for the Financial Times and Schroders Best Business Book of the Year award.

Before her academic career, she was Director of Research at Pecos River Learning Centers, where she worked on transformational change in large companies. In the early 1980s, she worked as Chief Engineer for architect/inventor Buckminster Fuller, and her book A Fuller Explanation: The Synergetic Geometry of R. Buckminster Fuller (Birkauser Boston, 1987) clarifies Fuller’s mathematical contributions for a non-technical audience. Edmondson received her PhD in organisational behavior, AM in psychology, and AB in engineering and design from Harvard University.

 

Daniel Mulino MP

Assistant Treasurer and Minister for Financial Services

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Born in Brindisi, Italy, Daniel was a young child when he moved with his family to Australia. He grew up in Canberra and completed his first degrees – arts and law – at the ANU. He then completed a Master of Economics (University of Sydney) and a PhD in economics from Yale.

He lectured at Monash University, was an economic adviser in the Gillard government and was a Victorian MP from 2014 to 2018. As Parliamentary Secretary to the Treasurer of Victoria, Daniel helped deliver major infrastructure projects and developed innovative financing structures for community projects.

In 2018 he was preselected for the new federal seat of Fraser and became its first MP at the 2019 election, re-elected in 2022 and 2025. From 2022 to 2025, Daniel was chair of the House of Representatives’ Standing Economics Committee in which he chaired inquiries; economic dynamism, competition and business formation and insurers’ responses to 2022 major floods claims.

In 2025, he became the Assistant Treasurer and Minister for Financial Services.

In August 2022, Daniel published ‘Safety Net: The Future of Welfare in Australia’, which aims to explore the ways in which an insurance approach can improve the effectiveness of government service delivery.