Long delays in processing death and total and permanent disability (TPD) benefits have led to ASIC suing the Construction and Building Unions Superannuation Fund (Cbus) for contraventions of the Corporations Act.
More than 6,000 Cbus members and claimants had their claim payments delayed by more than 12 months as at late 2022. This was more than half of total Cbus claims.
ASIC’s allegations include that:
- The trustee of the fund failed to act efficiently, honestly and fairly in handling the claims.
- Despite receiving reports from its third party administrator, the response from the trustee was inadequate, leading to financial losses by its members and claimants estimated at $20 million.
- The trustee failed in its reporting responsibilities to ASIC after becoming aware of the problems.
ASIC Deputy Chair Sarah Court said, “Delays in claims processing like those alleged by ASIC cause real harm to families who may be relying on the payments to meet critical expenses. This adds to difficult personal circumstances, whether grieving for a loved one or dealing with severe injury or illness. The additional anxiety and pain these delays caused compounded the issues these members and their families faced.”
Problems with claims handling by super funds had been flagged by ASIC previously. In May 2024 ASIC announced it would be undertaking a review of the superannuation industry regarding the payment of death benefits.
This followed a seven-fold increase in the complaints received by the Australian Financial Complaints Authority (AFCA) between 2021 and 2023 related to the handling of death benefits by super funds.
The latest report from AFCA in October 2024 shows complaints about claims handling by super funds have continued at these high levels with 1,730 complaints received in 2023/24, compared to 1,738 in 2022/23.
Super funds can take longer to pay insurance claims because the process is more complex. The insurance company will pay a super death benefit to the super fund trustee. It is then up to the trustee to determine who should receive the benefit with regard to its trust fund rules and superannuation legislation.
For policies outside of super the process is simpler, as the insurer will pay the death benefit directly to the nominated beneficiaries or to the deceased’s estate if no beneficiaries have been nominated.
Claims statistics for non-super policies in 2023 showed an average claim resolution time of 1.5 months for death claims and 7.3 months for TPD claims.
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