The financial services ombudsman has backed an insurer that cancelled death benefit cover under the Protecting Your Super reforms without informing the policyholder.

The insured held death cover through his Hostplus superannuation fund, but the trustee cancelled the insurance in July 2019, telling the ombudsman it had no other option under the PYS legislation.

The reforms aim to stop super accounts being eroded by excessive fees or unnecessary insurance, and the trustee cancelled the cover because the account was inactive and the member had not elected to maintain the insurance.

The man died in October 2023. His de facto spouse then complained that the trustee did not tell the insured it was cancelling the cover and he would have maintained it had he known that was an option.

She sought retrospective reinstatement or compensation from the trustee.

The Australian Financial Complaints Authority says Hostplus acknowledged it cancelled the cover without notice because it had no contact details for the man.

It says Hostplus erred in doing so – it was obliged to try to locate the man and “it made no such attempts” – but this did not cause the complainant loss, because the causal connection between the trustee’s error and the cancellation of the cover was too remote.

The trustee’s decision to cancel the cover and not reinstate it retrospectively were fair and reasonable, according to AFCA.

The ombudsman agrees Hostplus was required by super legislation to cancel the cover. It says given the man’s apparent disengagement with his fund, there is doubt over what he would have done if given the chance to elect in writing to maintain his death insurance.  

At the time of his death, the cover would have amounted to $10,136.

Read the determination here.