Finance Your Super Superannuation complaints down, but reforms bring their own problems
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Superannuation complaints down, but reforms bring their own problems

Fewer people had a bad experience in superannuation in 2021.
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The superannuation sector is apparently giving members less grief, with complaints to the Australian Financial Complaints Authority sliding by 29.6 per cent to 5246 for the year to June 2021.

AFCA’s latest figures, published during a webinar on Tuesday, saw performance figures reported by the authority improve in nearly all metrics.

But new problem areas emerged as a result of the effects of reform legislation and these present a warning to consumers to check their insurance cover.

Reforms aimed at preventing people paying for insurance they may not need have resulted in super fund members trying to make claims only to find they have no cover.

“One complaint we’re seeing quite a bit of is around the cancellation of insurance as a result of the Protecting Your Super package. An event occurs where they would like to claim on their insurance and they discover on contacting the super fund trustee that their insurance has been cancelled, said Heather Grey, AFCA’s lead ombudsman for the superannuation sector.

Under new rules introduced in in 2018 and 2019 superannuation accounts that have not received contributions for 16 months have had their insurance cover cancelled.

Insurance in super has also become an opt-in for people under 25, presenting the danger that young people will assume they’re covered – but aren’t.

Lost letter?

Complaints to ACFA over insurance came largely from people who had not received correspondence from their fund over the changes or had not read or understood it, Ms Grey said.

AFCA details these under its superannuation accounts category and although it said they were the most numerous, a breakout on their numbers wasn’t released.

However, some complaints in this area were about death benefit insurance.

Here, 451 people complained that the death cover they thought they would be entitled to on the death of a loved one was found to be missing when they tried to make a claim.

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Next highest on the complaints list was Total and Permanent Disability Insurance  (TPD), where this was held in a fund.

For the year just gone these totalled 978 – compared to 1161 the previous year.

Such complaints “are often very difficult to deal with because emotions run high or they involve a lot of medical information that is necessary for us to analyse,” Ms Grey said.

These were followed by income protection and death benefit insurance complaints, which amounted to 833 and 451 respectively. They were slightly below the previous year’s totals of 925 and 578.

The most common complaint about income protection was that insurers had classified a case claimed for income protection, which pays regular income, into TPD, which pays out in a once-only lump sum.

Delays in insurers handling claims was also a common complaint, with 856 cases reported. However, that was well down on 1260 reported in the previous year.

Fees and charges

In non-insurance areas the most common complaints about superannuation related to service quality, incorrect fees and costs and account administration errors.

All up these categories accounted for 1423 complaints compared to 1971 a year earlier.

By far the majority of complaints are handled and closed by negotiation by AFCA case managers.

Only 619 cases were formally decided by AFCA, with 5445 cases being negotiated earlier.

Overall cases resolved was 6245. That figure is higher than complaints received as it represented closure of some cases overhanging the previous year.

Xavier O’Halloran, director with Super Consumers Australia, said recent legislative change and the fallout from scandals unearthed at the Hayne royal commission into financial services meant “the situation was getting better” for super fund members.

“Complaints that previously came through things like people being charged for insurance premiums for insurance they didn’t know they had – the legislative changes might reduce some of those,” Mr O’Halloran said.

Although legislative change might have created new problems (like people assuming they had insurance cover that wasn’t there) overall the situation is improving.

“The government has been trying to deal with a lot of the problems in the superannuation system through a range of reforms,” Mr O’Halloran said.

Opposition superannuation spokesman Stephen Jones said he welcomed the fall in numbers.

“Compared to complaints to AFCA about banks which number around 90,000 per year and complaints to the TIO about telecoms services which run to about 125,000 per year, the level of complaints about super funds shows members are generally happy,” Mr Jones said.

“However, there is no room for complacency and funds must always maintain a keen focus on delivering for members.”

The New Daily is owned by Industry Super Holdings