SCT Quarterly - Q2 2017

Chairperson's welcome

Welcome to SCT Quarterly.

Thank you for the feedback regarding SCT Quarterly's relaunch last quarter, and welcome to our new subscribers. We're glad you like this format, and will continue to incorporate your suggestions.

It's a new edition, and time to focus on a new topic. This quarter, we are focusing on our second biggest single category of complaints: the deduction of insurance premiums. You can read more about this in the following section.

But before we get to that, let's reflect on another busy quarter at the Superannuation Complaints Tribunal (SCT).

In Q2 2017, we focused on outreach. I spoke at the Financial Counsellors Australia conference in May, discussing the role that we play in dispute resolution and highlighting the importance of superannuation. We recreated our fact sheets and added to the range, with more to come. You'll find them all here on the SCT website.

You may remember that in Q1, we held a member conference, welcoming our newly appointed members and providing training. As a result, Q2 saw our review numbers increase, and they look set to continue increasing in coming months.

Our overall complaint numbers held steady in Q2. I'd like to again thank the staff of SCT for their ongoing dedication to complaint resolution, particularly given public announcements during the quarter.

On 9 May, Treasurer Scott Morrison announced the creation of the Australian Financial Complaints Authority (AFCA), a 'one-stop-shop' set to replace SCT, the Financial Ombudsman Service and the Credit and Investments Ombudsman on 1 July, 2018.

Last week, Minister for Review and Financial Services Kelly O'Dwyer announced the creation of a transition team to lead the establishment of AFCA. We look forward to continued consultation with the team as they map the way forward for external dispute resolution.

Importantly, we are still accepting and resolving superannuation complaints, and will continue to do so until AFCA is up and running. And we'll keep sending you these updates, letting you know the types of complaints we're seeing and how they're being resolved.

We hope you enjoy this edition of SCT Quarterly. If you have any feedback, suggestions or queries, please send them through to us at

Helen Davis, Chairperson


Q2 2017 focus: insurance premiums

At the SCT, we categorise our complaints, enabling us to analyse trends. We have 47 active complaint categories, which fall under three broad headings: death complaints; disability complaints; and administration complaints.

The majority of our complaints fall under the heading of administration. And the biggest single complaint category under that heading - and our second biggest overall - is the deduction of insurance premiums. 8.6% of complaints received in Q2 2017 fell into this category.

Insurance premiums and remedies

At SCT, we stand in the shoes of the trustee. When reviewing a trustee's decision, we have all the powers, obligations and discretions conferred on the trustee, but may only exercise our determination making power to counteract any unfairness or unreasonableness in the trustee's decision. We must also act within the terms of the fund's governing rules (section 37 of the Superannuation (Resolution of Complaints) Act 1993).

We operate within the terms of the trust deed, and determine whether or not the decision of the trustee in question was fair and reasonable in its operation in the circumstances.

Some of the complaints we receive about the deduction of insurance premiums are not complaints for which we can provide a remedy. For example, they might be complaints about the perceived fairness of opt-out insurance being offered at all, rather than complaints about the fairness and reasonableness of the fund in its communication with the member about their particular insurance offering.

This confusion about what the SCT can and can't deal with in relation to the deduction of insurance premiums is often compounded by confusion about insurance offerings within superannuation generally.

Common areas of complainant confusion

Insurance is not usually top of mind when members start a superannuation account. Complainants often say that they weren't aware of their insurance cover, or that they either underestimated or couldn't calculate the costs based on the tables presented.

With low levels of consumer engagement in superannuation, clear communication about the benefits and costs of a member's insurance cover is important. Sometimes, during an SCT investigation, a complainant will realise that the insurance arrangements were communicated clearly and often but that they simply weren't engaged in reviewing it. In some cases, as complainants have learnt more about their level of cover, they have discovered that they are eligible to claim, or have obtained quotes on comparable insurance outside of superannuation and decided to maintain the cover.

To avoid complaints in the first instance, trustees can do the following:

  • Clearly communicate the insurance offering upfront, including the level of cover provided, what the premiums are and how they are calculated and charged, and any opt-out provisions.
  • Clearly communicate any changes in the payment of insurance premiums and/or related advice during investment transfers.
  • Where possible, include the impact on the member, using examples and/or calculations that clearly demonstrate the differences in the calculation of premiums and the level of cover.
  • Provide clear instructions for opting out of or cancelling insurance cover, and advise members when you have not been able to act upon their instructions. (For example, if you require a written request to cancel insurance and a member calls to request cancellation, advise the member that they need to put their request in writing, and explain that you will not be able to act on the request until they have done so.)

To avoid the escalation of any complaints received, trustees can do the following:

  • Direct the member to each instance of communication of the insurance cover, the premiums, any changes to cover, the impact on the member's account and the opt-out and cancellation instructions (e.g. application form, product disclosure statement, welcome letter, special event notices, and annual statements).
  • Objectively assess your communications and consider whether there has in fact been any ambiguity.


SCT by the numbers Q2 2017

In Q2 2017, we resolved 502 complaints, 7.3% of which related to the deduction of insurance premiums.

Types of complaints resolved Q2 2017 - top ten

 Type of complaint


 Death benefit distribution


 Deduction of insurance premiums


 TPD benefit – declined on medical evidence


 Delay in transfer of benefit


 Account balance


 TTD benefit – amount in dispute


 TPD benefit – delay in making decision


 Disclosure of information


 ROBP – financial hardship claim


 Fees and charges


9.4% of the complaints were finalised at review stage (in other words, with a determination by the Tribunal). The remaining 90.6% of the complaints were finalised and/or resolved by our staff at various stages of the investigation and conciliation process.

21.1% of finalised complaints were withdrawn by the complainant after resolution of their complaint at a conciliation conference. 15.7% were withdrawn by the SCT after satisfying that the complainant no longer wished to proceed with the complaint, and 10.6% were withdrawn as either lacking in substance, misconceived or trivial in nature (under subsection 22.3(i) of the Superannuation (Resolution of Complaints) Act 1993).

32.7% of finalised complaints were found to be out of jurisdiction. As in Q1, the vast majority of these – 77.4% – were found to be out of jurisdiction because the complaint had not first been made to the trustee.

In Q2 2017, we received 500 complaints, 8.6% of which related to the deduction of insurance premiums.

Types of complaints received Q2 2017 - top ten

 Type of complaint


 Death benefit distribution


 Deduction of insurance premiums


 Fees and charges


 Account balance


 TPD benefit – declined on medical evidence


 TTD benefit – amount in dispute


 Delay in transfer of benefit


 TPD benefit – delay in making decision


 TTD benefit – delay in making decision


 ROBP – financial hardship claim


In Q2 2017, the SCT received a further 5647 enquiries by telephone and email.


Case study 1: Opt-out spelled out

(reviewed by the Tribunal, determination D16-17\031 [2016] SCTA 126 (21 September 2016))

Background: The member joined his new employer-sponsored plan with the fund when he commenced employment in August 2011. The member's account was automatically established with insurance arrangements and a financial adviser. The account was debited with the insurance premiums, but the fees were paid by the employer. A letter and product disclosure statement (PDS) were sent to the member, outlining the arrangements.

When the member commenced a new job in October 2011, the trustee automatically rolled the account to a new plan within the fund. Under the new arrangements, the account was now debited with the fees, which were incorporated within the premiums. A second letter and second PDS were sent to the member, outlining the new arrangements. In November 2012, the trustee cancelled the arrangements due to insufficient funds in the account.

When the member joined a new employer in 2013, he contacted the trustee to discuss his superannuation. He then realised the effect that the premiums had had on his account balance.

Complaint: The member brought a complaint to the SCT, requesting the reimbursement of the premiums deducted from his account. He stated that he had never entered into a contract of insurance with the insurer and that the policy could not be imposed on him without consent.

Further details: The trustee advised that the letters and PDSs outlining the account details had been sent to the member and had not been returned to sender. The trust deed allowed the provision of insurance, and clearly outlined that it is the trustee that enters into insurance arrangements on behalf of the members of the fund, and that there is no contract of insurance between the member and the insurer. The member could have cancelled the insurance arrangements at any time.

Decision: The Tribunal accepted that the trustee acted lawfully, complying with the trust deed in establishing the insurance arrangements, including the manner in which the premiums and fees would be deducted from the account. The Tribunal also accepted that the trustee had communicated the arrangements with the member, and that the member could have cancelled at any time.

The Tribunal affirmed the decision of the trustee.


Case study 2: Communication confusion

(reviewed by the Tribunal, determination D16-17\087 [2016] SCTA 183 (29 November 2016))

Background: The member wrote to the trustee requesting the cancellation of his death and disability cover on 3 September 2003. The trustee wrote back to the complainant on 5 September 2003, advising that cancellation would result in the forfeiture of the option to contribute to the defined benefit scheme and asking him to sign and return a Cancellation of Basic Benefit Insurance form for their records. The member did not return the form, and the trustee did not cancel the insurance cover.

Complaint: The member brought a complaint to the SCT, advising that his wishes had not been carried out and requesting the reimbursement of the premiums deducted from his account.

He stated that the wording of the letter that accompanied the Cancellation of Basic Benefit Insurance form suggested that the insurance had already been cancelled, and he had continued to believe this had been done until early 2014.

Further details: The trustee advised that, as the member did not return the form, it did not cancel the insurance cover. The trustee had since sent half-yearly member statements to the member, all of which clearly outlined the existing insurance cover and the premiums that continued to be deducted from his balance.

Decision: The Tribunal noted that the wording of the letter dated 5 September 2003 did not state that the member needed to return the enclosed form in order for his insurance cover to be cancelled. It further noted that the wording suggested that it had in fact already been cancelled, using phrases such as 'Should you elect to reinstate your insurance cover…' and 'By relinquishing your insurance cover…'. The Tribunal determined that it was reasonable for the member to have assumed that his insurance cover had already been cancelled, and that there was no need to complete and return the form.

The Tribunal also noted that the trustee introduced new insurance arrangements effective 1 July 2004, which were communicated to members in May 2004. Members were advised that they had until 1 July 2004 to opt out of the new insurance cover. The Tribunal was of the opinion that, had the member's insurance cover been cancelled effective 3 September 2003, it would have been reinstated effective 1 July 2004.

The Tribunal set aside the decision of the trustee and substituted a decision that the trustee refund to the member's account the insurance premiums applicable from 3 September 2003 to 30 June 2004 effective at the same dates they were originally deducted.


Case study 3: Communication clarity

(complaint withdrawn by the Tribunal as lacking in substance)

Background: The member started a new account and insurance cover was automatically provided. Three years after starting the account, the member cancelled the cover and requested the refund of all insurance premiums. The fund cancelled the cover, but refused the request to refund all insurance premiums, stating that it had clearly communicated the details of the insurance policy and its premiums.

Complaint: The member brought a complaint to the SCT, stating that she was unaware she'd had the cover and that the fund had failed to communicate this with her. She requested the reimbursement of the premiums deducted from her account.

Further details: The trustee advised that it provided insurance on an opt-out basis as outlined in the trust deed. The trustee had clearly communicated this in the PDS, welcome letter and annual statements, and in a tailored letter to the complainant offering the chance to purchase additional units of cover. Each mention advised how many units of cover the member had and the applicable premiums, and provided instructions for the cancellation of the insurance.

The member stated her belief that the annual statements were less clear than the trustee suggested, but conceded that the PDS, welcome letter and tailored letter were clear in their communication of the insurance arrangements and the instructions to opt out of and/or cancel cover, and that she had received all items at her address.

Investigation outcome: The Tribunal withdrew the complaint as lacking in substance.


Feedback and contact us

We are constantly seeking to improve our services and the information we provide to consumers, trustees and industry, and we need your feedback to do it.

If you have any feedback on this edition of SCT Quarterly, or any queries or suggestions, please email with 'SCT Quarterly - Q2 2017' in the subject line.

Superannuation Complaints Tribunal
Melbourne VIC 3000

1300 884 114