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Confusion over payments for members caught by PYS

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Some super funds have established an ex-gratia payment pool for members who have unknowingly lost insurance cover from the Protecting Your Super (PYS) bill and made claims. But others are taking a “hard-line approach”.

Hostplus Head of Insurance Shane Fielding told an audience at the Australian Super Fund Association conference that in the month after the bill was implemented the super fund received seven insurance claims from members who didn’t know their cover had been cancelled; five terminal illness claims and two death claims. The claims were denied.

This is only “the tip of the iceberg”, Mr Fielding said. “There will be TPD claims that we don’t get notified about in the months or years down the track that are related to this period where we cancelled people’s cover.”

MLC Life Chief of Group and Retail Partners Sean McCormack says some of its partners are taking a “hard-line approach” to members who made claims when their cover was cancelled, and others were making ex-gratia payments.

RGA Reinsurance MD Mark Stewart told the conference his company had not seen any pressure yet for ex-gratia payments to be made in relation to the PYS legislation. However, RGA did look at changing its reinstatement terms after the PYS bill.

Mr McCormack says different fund partners are managing the loss of members’ insurance differently and there is no one-size-fits-all approach. The provisions MLC Life put in place “appear to be holding up”.

MLC Life told it declined one claim where the member was no longer covered due to the PYS reforms.

It has now implemented a range of product measures to provide additional cover extension to its super fund clients where it is appropriate.

MLC Life is striving to offer the best insurance terms to its customers and was assessing all claims empathetically, professionally and fairly, it told

Research from both RGA and Hostplus shows that younger members overwhelmingly did not opt-in to life insurance. Only 10% of Hostplus members aged between 16 and 25 opted in.

Less than 10% of members with insurance in super through RGA chose to opt-in. The numbers were highest among those age 56 to 65, and those 65 and above.