A life insurance policy cancelled under the Protecting Your Super regime will not be reinstated despite a complaint that the owner did not understand he was losing the cover.

The fund member died shortly after his cover was cancelled, but his executor asked the trustee to reinstate the $2.07 million benefit.

Trustee Avanteos Investments then asked the group life insurer, which declined, and the trustee decided not to pursue the matter or compensate the deceased’s estate.

The Australian Financial Complaints Authority agrees with the trustee’s decision.

The Protecting Your Super reforms aim to stop superannuation balances being eroded by fees and charges for cover members might not want or need. However, they have led to concerns that fund members do not realise their cover has been cancelled and families are missing out on death benefits.

The super fund member’s life cover was cancelled in March 2024 and he died that May.

His brother and executor says notices sent to the man were misleading or deceptive, particularly the annual insurance review notice, which he says gave the impression other letters noting the cover would be cancelled did not apply.

But an AFCA panel says the communications were not misleading or deceptive, and even if the annual review notice was, “the panel does not find the deceased relied on it to his detriment”.

The trustee’s decision is fair and reasonable, AFCA says.

Its ruling says the deceased was sent several notices about cancellation of cover under the PYS regime.

Two letters said his cover would be cancelled unless he took action. He made “no eligible contribution or election”.

A later letter notifying him of cancellation included a form to complete if he wanted to reinstate cover, and gave him 90 days to do so. He choose not to and died within the 90-day window.

AFCA says the executor’s June 2024 request for reinstatement sought cover for a risk that “had already come to pass. The panel also noted the request for reinstatement had to be completed by the insured member or their power of attorney.

“This was not done, and was not capable of being done, due to the passing of the deceased.”

Read the determination here.