Rest Super accused of charging up to 500,000 retail workers for useless insurance

For over a decade Rest Super wrongfully charged for useless income protection insurance, a class-action lawsuit on behalf of up to 500,000 members claims.

Vicki Doyle, chief executive of Rest super fund

Rest Super was slapped with a class-action lawsuit on behalf of up to 500,000 members, accusing the $80bn retail and hospitality workers superannuation fund of wrongfully charging for junk “income protection” insurance.

The class action alleges that from December 2008 to June 2019, Rest automatically deducted insurance fees from the accounts of thousands of retail workers’ who were signed to a Rest super account and an bundled income protection insurance policy by default.

When those workers did not work for 13 months or more, a common occurrence in retail and hospitality, and stopped making super contributions, not only did the insurance deductions not stop, but the policies did not provide those members with any coverage.

“This was money down the drain for fund members who paid a premium for no benefit,” said Hadi Boustani, the Shine Lawyers attorney leading the lawsuit.

“As a result, we’re seeking compensation for insurance premiums which we allege were unfairly deducted, as well as investment returns and administration costs,” he said.

In cases when members held multiple income protection insurance policies at the same time, which is also common in the industry, the Rest income protection policy provided little to no coverage, Mr Boustani said.

The lawsuit was filed late December in the Federal Court, and on Friday Justice Button made orders including requiring Rest to file its defence by March 28, the lawyers said.

Rest said it would defend the action in the Federal Court.

“Rest’s group insurance cover is and has always been designed to meet the needs of our members,” the fund said in a statement.

“Offering default income protection cover to Rest members is a highly valuable benefit and supports members who are unable to work due to illness or injury. Many Rest members work part time and would not be able to obtain income protection cover by any other means or at a reasonable cost.”

The fund also said it had paid out close to $222m in benefits to members in over 10,000 income protection claims.

The class action is funded by London-headquartered litigation financier Woodsford, which specialises in cases involving companies that fall below environmental, social, and corporate (ESG) standards.

Jarrod Lane, a former McDonald’s worker who was signed up to Rest super with an income protection insurance policy by default, said he is part of the lawsuit because he believed he was charged for income protection insurance that he could never claim on.

“I felt it was important to join this class action because what Rest has done is wrong and they should compensate those who were affected,” he said in a statement.

The claim alleges Rest members were automatically signed up to – and charged fees for – income protection insurance issued by the local subsidiary of Hong-Kong insurer AIA Group.

The policy covered a monthly income benefit covering up to 84 to 77 per cent of worker’s pre-disability income, and the 9 to 12 per cent of compulsory super on that amount, as applicable during that time.

The lawsuit claims Rest knew or should have known that there were many non-working inactive members who were likely to be unemployed such that their pre-disability income was likely to be nil.

In those circumstances, “the non-working inactive member would not be entitled to receive any benefit from the default IP cover, and therefore the default IP cover was of no value and utility to the member,” the lawsuit says.

Originally published as Rest Super accused of charging up to 500,000 retail workers for useless insurance