How life insurers avoid giving you a death benefit payout

Date: Nov 22, 2016

A man committed suicide in 2007 and the family is still waiting for their payout that has been denied by REST Super and its life insurer AIA. This case is one of the leading forces in an investigation into life insurers and the fairness of their practices.

The case of Garrath Donaldson

The Sydney Morning Herald reports that the family of Garrath Donaldson, the 22-year-old man who committed suicide, has been refused a superannuation payout after the death of their loved one.

This case will be part of a parliamentary investigation into the $44 billion life insurance industry and its regulators. In particular, the investigation will look into whether insurers are unethically denying payout claims.

REST was able to deny the payout because, in 2013, they changed a rule so that there is no obligation to give a payout if a balance falls below $1,200. Donaldson’s account fell below this threshold, and thus the $92,000 claim made by his estate was denied.

In another article from the Sydney Morning Herald on August 2016, it was explained how a retired financial adviser, Jeff Hudson, has been fighting the REST Industry Super for almost a decade now.

He said that he has received many complaints about the life insurance company that has “flown under the radar at the same time the financial advice sector was being torn apart because of poor practices”.

Making a claim 

A recent Australian Securities and Investments Commission (ASIC) report explains how vital a risk management tool life insurance is for families to take care of all the costs associated with the death of a loved one.

The ASIC report makes it clear that the practices of life insurers are questionable. They have found that life insurers have found ways around giving payouts with technicalities, even though the consumer may deserve a payout based on the ‘spirit’ or ‘intent’ of a policy when they bought the life insurance. ASIC concludes that insurers should make an effort to be fairer in giving payouts that are in accordance with a policyholder’s reasonable expectations.

They state that it will be an ongoing challenge, however, with people making claims that are not technically covered under the rules. Because of the nuanced nature of superannuation, Gerard Malouf and Partners’ Superannuation Lawyers have created a practice focusing solely on superannuation and have become a leading law firm in Australia in administrating and lodging death benefit claims. Call us today on 1800 004 878  to get our expert legal advice and begin the process of making a claim.

Call us now on 1800 004 878 to book a free appointment with one of my compensation experts, or email your enquiry.