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Trustees need to take extreme care in advising
members of changed insurance terms, including
properly training their staff who interact with
The decisions under review are those of the trustee
and “Insurer 1” in rejecting the member’s request
to continue to top up his income protection
payments to a level of 90 per cent of his pre-
On joining the fund in 2011, the member
became entitled to participate in the fund’s group
personal accident and sickness policy provided by
Insurer 1. The member had also taken out a life
insurance and income protection policy in 2010
with “Insurer 2”, which sat outside the fund.
The member sustained a work-related
psychological injury in 2012, from which he
obtained WorkCover benefits equal to 85 per cent
of his pre-disability income from May 2012 to June
2013. He then lodged a claim with Insurer 1 via
the fund. That claim was approved for 90 per cent
of his pre-disability income. After the offset of the
WorkCover payments, Insurer 1 paid the difference
up to 90 per cent.
Concurrently, Insurer 2 approved the member’s
claim for 75 per cent of his pre-disability income,
plus 9 per cent superannuation contributions, but
as he was already receiving 85 per cent of his pre-
disability income via WorkCover, no payments
were required to be made by Insurer 2.
After 12 months, the member was assessed as
having a permanent impairment and was offered
a lump sum payout by WorkCover, which the
member chose not to accept. WorkCover ceased
making payments and so did Insurer 1.
The fund’s original policy (“policy A”)
commenced in May 2011, and was replaced by
“policy B” on 1 November 2011. Accordingly,
policy B was in place when the member lodged his
original claim with the fund.
The member’s sister called the trustee and
Insurer 1 and was provided with a copy of policy
A, but not policy B. The trustee’s staff assured her
on several occasions that it was the correct policy.
The trustee then wrote to the member to advise
him there had been an upgrade of the policy in
2011, and that the correct policy at the time of
his claim was policy B. The trustee noted the main
enhancements had been advised to members in a
document sent with a 2011 member statement.
However, the change in policy that related to the
member’s situation was not mentioned in that
notification. The trustee then claimed that the
information was on its website, but the information
was only uploaded after the member had started
The product disclosure statement (PDS) the
member received on joining advised about
automatic income protection insurance up to 90
per cent of income, and that “payments will stop
when... you are receiving any statutory benefit like
Workers Compensation and that payment stops”.
However, in the updated policy B, a special
provision was extended to include the scenario
where the statutory benefits ceased but the
member was unable to return to work. In this
circumstance, the insurer would pay a benefit of 65
per cent of income.
The trustee and Insurer 1 submitted policy B
was the correct policy and, the benefit payable
by Insurer 2 was 75 per cent of income, so there
would be a total offset for Insurer 1.
The member pointed out that all the information
initially given to him stated that the top up would
be paid in his circumstance. He wanted the top up
payments to continue according to the policy terms
in place when he joined the fund.
The Tribunal held that the trustee had clearly
failed in its obligation to properly and fully disclose
the changes to the fund’s income protection policy
which were so significant they should have been
specifically notified to members. The Tribunal’s
decision also mentioned the trustee’s staff being
poorly informed of the insurance changes and
being unaware of the existence of new policy B.
For these reasons, the Tribunal held the trustee’s
decision would be set aside. The member was
entitled to the payment of a lump sum equivalent
to the additional payments over and above the
income protection benefit received by him from
Insurer 2 to a maximum of 90 per cent of his pre-
disability income for the remainder of the benefit
period and commencing from the date Insurer 1
ceased its payments. D14 -15\081
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