Super scheme sued by ASIC over $1.5m ‘mistake’
Statewide Super is being sued by the corporate regulator for "misleading and deceptive conduct", relating to $1.5 million in insurance premiums that should not have been deducted from about 14,000 members' accounts.
The Australian Securities and Investments Commission has filed an originating process with the Federal Court, in which it claims that Statewide, which is South Australia's largest locally-based superannuation fund, told some of its members who had account balances of less than $4000 that they had insurance cover and that Statewide was entitled to deduct premiums to pay for that insurance cover, when on both counts that was not correct.
Statewide said in a statement that it had self-reported the issue, which was an "insurance administration error", and that "all entitlements will be honoured''.
The court documents claim that Statewide was "misleading and deceptive" by making the claims around insurance in annual statements made to the affected members.
The court documents indicate that changes to insurance data were not picked up when clients were migrated from one technology platform to another.
ASIC is seeking a declaration that Statewide breached its obligation under its financial services licence by "deducting, on or after 1 July 2017, approximately $1.5m in insurance premiums from member superannuation accounts in circumstances where member insurance cover had ceased under the terms of the relevant Statewide insurance policies''.
The Advertiser has calculated that the effect on each member would have been in the range of $110.
ASIC is also seeking a declaration that Statewide "breached its general obligation as a financial services licensee … in contravention of the Corporations Act'' and "An order that Statewide pay to the Commonwealth a pecuniary penalty in respect of the contraventions … as the Court considers appropriate''.
The changes in the terms of Statewide's policies were designed to protect low balance members by not charging those with super balances of less than $4000 for insurance premiums.
These changes, which were not mandatory at the time, became mandatory in a slightly different form across the superannuation sector from April 1 last year, and apply to people with super fund balances of less than $6000 or who are under 25 years old, who must now "opt-in" if they want insurance cover.
Statewide said it would communicate with and remediate any affected current and former members and "all entitlements will be honoured''.
"Once Statewide Super discovered the nature of the insurance administration error, the organisation self-reported to ASIC, while conducting a forensic examination and developing a remediation plan,'' the organisation says in its statement.
"Statewide Super has actively sought to co-operate with ASIC at all times. Statewide Super continues to progress its program of remediation, supported by external experts.''
ASIC is yet to make a public statement on the matter.
Statewide is a "profit to member fund", meaning that any excess profits generated do not go to shareholders but benefit members. It has more than $10.4 billion in members' funds under management.
Earlier this week ASIC lodged proceedings against another super fund, Rest, claiming it made false and misleading claims that discouraged members from leaving.
Originally published as Statewide Super sued by ASIC over $1.5m 'mistake'