Colonial First State Investments Limited and AIA Australia have reached an in-principle agreement to pay $140 million to resolve a long-running class action over alleged overcharging on insurance offered through superannuation accounts. The settlement, announced by Shine Justice Limited, the law firm representing the plaintiffs, is subject to approval by the Federal Court of Australia and does not involve any admission of liability.
The case, filed in 2020 on behalf of lead applicant Simon Mallia and a group of fund members, alleged that Colonial First State and its insurance partners charged excessive premiums for life, total and permanent disability (TPD), and income protection cover provided within several Colonial First State superannuation products. The proceedings named Colonial First State Investments Ltd (CFSIL), Colonial Mutual Life Assurance Society (CMLA, also known as CommInsure), and AIA Australia Ltd as respondents.
The class includes members who held group insurance through Colonial First State’s FirstChoice Personal Super, FirstChoice Employer Super, FirstChoice Wholesale Super, and Commonwealth Essential Super between January 2014 and February 2022.
Mallia, who held both death and TPD coverage, alleged that the superannuation trustee breached its duty to act in the best interests of members by maintaining group insurance arrangements that resulted in premiums above market rates. He further claimed that the trustee improperly benefited the insurer — first CMLA, later AIA Australia after it acquired CommInsure’s life business in 2021 — at the expense of members.
The respondents denied wrongdoing and argued that premium rates reflected the diversity of fund membership, product design, and underwriting risk. They also contended that individual member circumstances and optional coverage features varied significantly.
While both sides were preparing expert evidence for hearings later this year, the companies agreed to negotiate an in-principle settlement to conclude the dispute. The settlement amount will be distributed among eligible fund members after court approval and verification.
At $140 million, the settlement ranks among the largest payouts linked to superannuation insurance arrangements. Colonial First State and AIA Australia said they reached the agreement to avoid further litigation costs and prolonged uncertainty.
Shine Justice, which filed the class action under Australia’s Federal Court class action regime, welcomed the resolution. The firm said the action sought compensation for thousands of superannuation members who may have paid “inflated premiums” on default life and disability insurance embedded within their retirement savings accounts.
The Federal Court will now review the settlement to determine whether it is fair and reasonable for all affected group members. A settlement deed is being finalized, and an approval hearing will likely occur later this year.
For the insurance and superannuation industries, the Mallia settlement highlights the growing exposure facing trustees and insurers involved in group insurance arrangements embedded in retirement funds. Under Australian law, superannuation trustees have statutory and fiduciary duties to act in the best interests of members, including ensuring that insurance premiums deducted from member accounts are appropriate and competitive.
The case serves as a warning that pricing, insurer selection, and product governance decisions made within large group schemes can attract class action scrutiny. Similar actions have emerged in recent years targeting trustees and insurers for allegedly failing to monitor commissions, fees, and risk pricing in default insurance arrangements.
Analysts say the outcome underscores the importance of transparent tender processes, independent benchmarking, and robust oversight of insurance partners. For insurers, it reinforces the commercial and reputational risks of perceived conflicts of interest when partnering with superannuation trustees.
Colonial First State, once part of Commonwealth Bank of Australia, has been among several major superannuation trustees to face legal challenges over insurance and administration practices. Its group insurance policies were underwritten first by Colonial Mutual Life (CommInsure) and, following AIA’s acquisition of that business in April 2021, by AIA Australia.
The Federal Court’s eventual approval of the settlement will likely conclude a five-year proceeding that has drawn attention to the governance of insurance within Australia’s $3.7 trillion superannuation sector.
For insurers and reinsurers globally, the Mallia case adds to a growing body of litigation highlighting the fiduciary and pricing risks of group insurance schemes — a reminder that as consumer scrutiny and regulatory oversight increase, so too does the potential for liability in the management of default coverage inside retirement funds.
