ASIC presses super trustees to refund for higher default ‘smoker’ premiums

After an ASIC investigation, nine super trustees have ceased charging new members life insurance premiums at higher smoker rates after labelling them as “smokers” by default.

All seven super businesses had moved, or planned to move, existing members paying smoker rates premiums by default onto non-smoker or blended rates; and four super businesses had refunded or agreed to partially refund members for the extra premiums paid because of the default “smoker” classification.

ASIC commissioner Danielle Press said premiums for smokers were generally substantially higher than for non-smokers and requiring members to take “active steps” to confirm their non-smoking status was “contrary to community expectations”.

She said many Australians might not realise default classifications could affect the price of their cover and therefore, reduce their retirement benefits.

“In light of the low smoking rate, merely providing disclosure and putting the onus on members to act is not enough to support good member outcomes,” she said.

ASIC said when the planned remediation was complete, more than 5,000 non-smoker members would have received more than $3.6m in compensation.

Only two funds – Intrust and Netwealth – have paid full refunds, while CFS and Equity Trustees have made partial remediation. AMP, IOOF have not made any remediation, while Suncorp is yet to make a decision.

“Those trustees that have committed to remediation are heeding the lessons of the financial services royal commission – that trustees should seek to achieve outcomes for members in line with community standards and expectations,” Press said.

She urged members who believed they had been inappropriately classified as “smokers” to approach their fund in the first instance or contact the Australian Financial Complaints Authority for “fair, free and independent dispute resolution” if they had complaints.