REST has steadfastly denied that the deduction of insurance premiums from members who were no longer covered or had become unemployed amounted to misconduct but accepted that failure to provide written reasons for decisions about death benefits on 184 occasions was a breach of key superannuation laws.
The industry fund for retail workers made these assertions in a written submission to round six of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry after being singled out in counsel assisting Mark Costello’s closing submission for potential contraventions of both the Superannuation Industry (Supervision) Act and the Corporations Act.
REST may have engaged in misconduct when it continued to deduct insurance premiums from members who were no longer covered because their employment status changed or they fell below the minimum balance threshold in a breach of the SIS Act, Costello said last month.
In a case study illustrating some of the issues, a REST member became totally and permanently disabled five days after his cover lapsed, due to ceasing work. REST was not aware the member was no longer working and continued to deduct premiums until it received a claim for total and permanent disablement. The TPD claim was denied but REST refunded the premiums that had been paid after the member’s employment ceased.
REST stated “whether viewed against the provisions of the SIS Act identified by counsel assisting or community standards more generally, counsel assisting’s submission should not be accepted”.
The fund further stated that counsel assisting’s submission pays “no or insufficient regard to the reality in which REST provides benefits” and that it was unable to legally compel a member or a former employer to ensure that a member’s employment status was updated in “real time”.
REST stated that it has attempted to convey to members how important it was to update their employment status with the fund, and had worked with its group insurer, AIA Australia, to ensure premiums were deducted from members’ accounts not from contributions.
Another potential instance of misconduct Costello levelled at REST was that the fund might have failed to do everything reasonable to pursue an insurance claim for a beneficiary. This was illustrated by a case study about a member who became paraplegic in May 2012 after falling from the fifth floor of a building.
REST accepted that the matter “represented a less than optimal outcome in terms of the claims process but arose in the unusual circumstances of that claim”.
The fund also pointed out that its administrator, Link Group-owned Australian Administration Services, had admitted to an administrative error when recording the member’s employment status.
“It…does not represent a systemic issue,” REST stated. “This submission [from counsel assisting] also overlooks the fact the member’s claim was ultimately paid in full.”
But the industry fund did accept that 184 separate cases where it had failed to provide reasons for a decision in response to a complaint about the payment of death benefits between March 15, 2017, and September 13, 2018, contravened the SIS Act. REST stated in its submission that this breach was “neither intentional, nor reckless”, and added that it occurred because of the use of a different template.
The fund did not accept that these actions were a breach of the Corporations Act, however, and “does not consider that the evidence allows the commission to making a finding that it has”.
In a surprise turn, REST filed a breach report with the corporate watchdog during the insurance round of the Hayne royal commission, owning up to the 184 potentially criminal instances when it might have inadvertently breached laws.
Costello attributed some of the fund’s potential breaches to inadequate systems that were too reliant on hard-copy claim forms and were, therefore, at risk of human processing errors. The systems also were not capable of detecting changes in employment status that could render members unable to claim on policies for which they were still paying, he said.
REST rejected this assertion in its submission because it suggested “some systemic shortcoming” and it stated there was “no evidence of any other systemic issue”.
“REST maintains that it has appropriate compliance systems and processes which work effectively,” the fund stated.
In a statement on Wednesday, REST said counsel assisting focused on a small group of instances “representing less than 1 per cent of REST claims”.