A man who last smoked when he was 13 at scouts was shocked to discover AMP had over-charged him $76,000 in insurance premiums over eight years after wrongly treating him as a smoker.
AMP refused to refund the man and others who also ended up in the same situation after being transferred from a corporate superannuation account to a personal product on leaving their employer.
It only refunded the $76,766, plus lost interest, after the man won his case in the Superannuation Complaints Tribunal, the banking royal commission heard.
The man was shocked when his financial planner told him he was listed as a smoker when his super was transferred or “delinked” eight years earlier in 2005.
He had $1 million of life insurance through his AMP super and was paying $2600 a month in premiums, which was cut to $1600 once he submitted a non-smoker declaration.
AMP said the man failed to fill out the declaration at the time of the 2005 transfer, which meant he was not treated as a non-smoker.
AMP maintained it did not default customers into smoker premium rates.
It told the inquiry there were rates for non-smokers and a “hybrid” one, where the only difference was whether the person completed a non-smoker declaration.
AMP executive Paul Sainsbury agreed it would have been better if the annual statements disclosed the smoker status, as occurred now for delinked customers, but did not accept it was unethical as one employee stated.
“I think it was entitled to rely on the communication to the member at the time of delinking, but I do accept that the disclosures could have been better with the benefit of hindsight,” he said on Monday.
The regulator this month said all superannuation trustees had agreed to stop treating fund members as smokers by default under their life insurance cover, after some continued to do so when they transferred from an employer plan to a personal one.
The royal commission also heard AMP’s CEO received a complaint in December from the wife of a man diagnosed with a rare brain tumour, who discovered he no longer had insurance attached to his superannuation after being delinked from an employer plan.
His MySuper account did not have the required insurance attached to it.
“You would imagine our distress and horror to be informed today that this is not the case,” the wife wrote.
Mr Sainsbury said the super trustee believed its decision was appropriate even though AMP’s customer advocate said it was an administrative error that the man was not offered insurance.
But AMP’s group executive wealth solutions and customer said the man got a very good outcome in terms of being granted default cover and an ex-gratia payment.