ASIC probes super fund Rest over death payout breaches

ASIC is investigating industry fund Rest after it admitted failing to give members reasons why it refused death payouts.

Royal commissioner Kenneth Hayne. Picture: David Geraghty

The corporate regulator is investigating industry superannuation fund Rest after it admitted to breaking the law by failing to give members reasons why it refused death payouts.

In its submission to the royal commission published yesterday, Rest said it did so 184 times between March last year and September 13 this year.

Rest, which looks after the savings of lowly-paid retail employees, said that on September 13, three days into the royal commission’s hearings on insurance, it changed a template letter that failed to refer to a reason for refusing a death benefit so that it complied with the law.

“Rest submits the breach was neither intentional nor reckless,” it told the commission.

It said it accepted the failure was a breach of superannuation laws administered by the Australian Prudential Regulation Authority, but it did not accept the misconduct was a breach of its financial services licence and the corporate law.

It said it reported the conduct to the regulator responsible for financial services law, the Australian Securities & Investments Commission, out of “an abundance of caution”.

“Having considered Rest’s licence conditions, Rest submits there is no obvious candidate [for a breach] and the submissions made by Counsel Assisting invite the Commission to speculate on this matter,” it said.

It rejected counsel assisting’s allegation the breach was “attributable to Rest’s systems, insofar as this suggests some systemic shortcoming”.

“Rest maintains that it has appropriate compliance systems and processes which work effectively,” it said.

The threat of further legal action stemming from revelations sparked by the royal commission came as insurance companies that were stung for charging life insurance premiums to dead people and stalking mental health claimants said that that was the way business was done in the industry.

Commissioner Kenneth Hayne’s interim report last week, which blamed rampant corporate greed and lazy regulators for the mountain of misconduct throughout the financial system, did not cover the superannuation or life insurance rounds of public hearings. They are due to be dealt with in his final report in February.

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AMP hit back at a number of allegations made by counsel assisting Rowena Orr QC, arguing that the continued charging of life insurance premiums to the dead did not amount to an offence. AMP said it was “inevitable and appropriate” to charge the dead until it was informed of a death, and that it was always policy to refund money charged to dead members. However, it had been plagued by a problem with how the refunds were “calculated and processed”.

Australia’s biggest life insurer TAL admitted it broke the law by bullying and lying to a nurse who claimed on an income protection policy as part of a years-long effort to avoid paying the claim.

It said its conduct, which included hiring a private investigator to snoop on the woman, demanding she repay $69,000 and falsely telling her that filling out a daily diary was a condition of her policy, breached its legal duty of utmost good faith.

However, TAL denied it had a systemic problem with the enthusiastic way it conducted investigations up until 2013, saying its approach was “adopted throughout the industry at the relevant time”.

ClearView Wealth argued that it should not face findings that it breached criminal laws in all of the 300,000 to 303,000 times it was claimed to have broken anti-hawking provisions.

These were not all breaches, it said, but included a number of calls made where the company could not verify that it had complied with law.

“An inability on the part of ClearView to establish positively that in every call there had not been a breach does not, however, establish that in every call there was a breach,” ClearView’s lawyer Anthony Cheshire said.

Commonwealth Bank accepted that its scandal-plagued life insurance arm CommInsure may have breached criminal laws four times when it misled and deceived customers in its advertising about trauma cover, particularly for heart attacks.

CBA said it accepted its failure to keep up with medical opinion also fell below community standards and that its attempt to hide information from the Financial Ombudsman Service constituted misconduct.

Freedom Insurance, which this week announced a broad-scale overhaul of its business, the departure of its two most senior executives and a plan to cull 140 staff, said that ASIC — not the royal commission — may be the best body to investigate possible breaches of the law.

“ASIC is already in the process of reviewing Freedom Insurance,” Freedom said.

It opposed the proposed findings of the royal commission that selling a policy to a 26-year-old man with Down syndrome may have breached laws that bar unconscionable conduct.

Suncorp hit back at a number of allegations of misconduct over its decision to push ahead with misleading ads despite an ASIC investigation into the group.

Lawyers for the Brisbane-based insurer said its behaviour was not misleading or deceptive and that its product disclosure statements would leave “no real doubt” that the company could offer cash settlements based on the lower of the quotes it received.

Suncorp, which launched misleading ads just days after ASIC raised concerns about its potentially misleading behaviour, said it was “not obliged to pre-empt the view of a regulator that is conducting an investigation” and that the “community does not expect insurers to refrain from advertising good products through a campaign which the insurer believes is satisfactory”.

Youi complained that Ms Orr sought to portray it “in the worst possible light” and blamed its own customers for its tardy behaviour.

“No attention was given to the many claims that were dealt with in an outstanding manner by Youi in difficult circumstances or the care and attention that Youi tried to bring to those affected by these events,” it complained.

It took issue with one of the claimants, Sacha Murphy, over high lead levels recorded by her two children.

The Environment Protection Authority told Ms Murphy they would clean up lead contamination in her backyard after her roof was replaced following a storm, but the commission heard it took 18 months for Youi to do so.

“Ms Murphy and her family had been living in Broken Hill for a considerable amount of time and she was aware of lead issues in the community,” Youi said.

Allianz admitted it was open for the royal commission to find it had broken the law over a failure to tell the corporate regulator it had misled consumers with information on its website.

But the insurer said there was only limited evidence backing allegations it failed multiple times to report serious breaches to ASIC, failed to be honest and frank with the regulator and that it sought to manipulate findings in a supposedly independent report destined for the prudential regulator APRA.

“There is no basis to conclude that Allianz’s input into the … report, however minimal and however characterised, was in any way improper,” it said.

“There is nothing to suggest APRA was concerned.”