Grace had signed up for a workplace savings scheme in 2015. As a member of this scheme, Grace was entitled to become a member of her workplace’s group life insurance policy. Grace signed up for this policy when she joined the workplace savings scheme and was very happy with the service for a number of years.
However, in 2019, the premiums for Grace’s policy increased substantially, roughly 25%. Grace was not pleased with this price hike. Grace contacted the manager of the group policy (who was also the manager of Grace’s workplace savings scheme), and asked some questions about the reasons for the increase.
The scheme manager said that all insurers need to increase their policy premiums every now and again, and that this had been the first across-the-board premium increase in nearly 5 years. The manager said the policy’s premiums were still very competitive. The manager also mentioned that the increase in monthly payments was not just an increase in premiums – a small part of the increased cost was an increase in the manager’s fees.
Grace was not pleased with the scheme manager’s response and made two distinct complaints to FSCL:
- Grace did not think that the scheme manager had done enough to represent her interests and fight against the insurer’s premium increase. Grace was not convinced that the manager had acted in their members’ best interests, and Grace wanted to see evidence of the manager’s negotiations with the insurer.
- When the scheme manager responded to Grace’s questions, they mentioned their fee structure had changed. But that was the first Grace had heard about the change in fees. Grace had received plenty of notice about the increase in the insurer’s premiums, but did not think the change in the manager’s fees had been properly disclosed.
We told Grace that we could not investigate her complaint about the increase in their premiums, because FSCL cannot investigate complaints about the management of a scheme as a whole. The manager’s duty to act in the policyholders’ best interests was a duty they owed to the policyholders as a whole – it was not a duty they owed to Grace as an individual. So, this was a complaint that we could not investigate.
We could, however, look at the manager’s fee disclosure – because the manager had a duty to fully and accurately disclose their fees to Grace. And we shared Grace’s concerns on this point.
When the premiums had increased in 2019, the scheme manager had taken the opportunity to change their fee structure and increase the amount they were charging scheme members. The manager had disclosed to their members that their fee structure was changing, but they had not explained how the new fees would be calculated, and they had not broken down how much of a member’s monthly premium payments would be made up of the manager’s fees. We did not think this was acceptable.
We contacted the scheme manager and expressed our view that their fees disclosure was inadequate. They committed to provide better disclosure in future. They also agreed to notify the issue to the Financial Markets Authority and seek guidance on how to address the fees that had been charged since the premiums increased in 2019.
The scheme manager agreed to refund the $320 which Grace had paid in increased premiums and fees since 2019. They also acknowledged the time and effort which Grace had put into identifying this issue and offered to pay her an additional $5,000 as compensation for the stress and inconvenience she had been through.
Grace accepted this offer, although begrudgingly. Grace’s complaint had never been about the money so much as the principle. Gracey wanted the scheme manager to refund all the fees and increased premiums charged to all of the scheme’s members, so the $5,320 was only a minor victory. But Grace accepted that the Financial Markets Authority was now aware of the issue, and that they were the right body to look into the systemic issue of the effect the disclosure had on other members.
Insights for consumers
FSCL’s investigation process is very focussed on individual complaints. We can require a financial service provider to pay compensation to the person making the complaint, but we cannot award compensation to people who have not personally made a complaint to us. But there are ways that we can help resolve issues affecting many consumers.
Where we identify a systemic issue, we will raise our concerns with the financial service provider. We will also notify the issue to the relevant regulator. This is usually the Commerce Commission or the Financial Markets Authority. And those regulators have the power to undertake broader investigations than FSCL, which can uncover and help fix serious systemic issues.
So, although FSCL cannot order a financial service provider to fix a systemic issue, we do have tools which can help, and pathways for getting systemic issues resolved.