Insurance dispute highlights trap with SMSF advice
FOS has reminded SMSF practitioners to carefully review their clients’ insurance arrangements in relation to super, after one practitioner ended up paying compensation to a client over an insurance dispute.
FOS ombudsman Allison Maynard says the failure to consider insurance before setting up an SMSF and transferring funds is one of the common disputes the organisation sees with SMSF advice.
Ms Maynard told SMSF Adviser in one dispute matter, an adviser had told a couple to set up an SMSF, and while the adviser was aware of the need to arrange alternative insurances, they had moved the client’s superannuation across before the insurances were in place.
“Those consumers ended up with insurance policies with higher premiums and with exclusions that their previous policies didn’t have,” she said.
“The clients ended up getting compensated for that [by the practitioner].”
Ms Maynard said in situations where clients are in their 50s or have health conditions, it is especially important for SMSF practitioners to look at the insurances held by the client with their existing superannuation.
“Clients may not be able to get the equivalent insurance so there needs to be attention paid to insurance issues,” she said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.