Super funds warned over delays in assessing life insurance claims

The corporate watchdog has put super funds on notice over delays in dealing with death and disability insurance claims, after launching a landmark case against $94-billion giant Cbus that could result in hefty fines for the embattled fund.

In the first case from the regulator over delays in claims handling, the Australian Securities and Investments Commission launched Federal Court proceedings against Cbus on Tuesday, alleging the fund failed to identify and prevent delays that affected 10,000 members since August 2022.

ASIC is taking action against Cbus, chaired by former Labor treasurer Wayne Swan.Credit: Louise Kennerley

More than half, about 6500, were still awaiting resolution a year after lodging a claim, ASIC alleged in court documents.

The case comes as Cbus – chaired by former Labor treasurer Wayne Swan – is also under intense political pressure over its links to the disgraced construction union, the CFMEU. On Thursday, the fund’s chief executive, Kristian Fok, will be grilled at a parliamentary inquiry, where he is expected to face questions over the fund’s CFMEU links, the ASIC case and Swan’s commitment to support a government housing policy.

Cbus is under fire.Credit: Tony Moore

On Wednesday, ASIC deputy chair Sarah Court said the corporate cop believed the scale of alleged failings at Cbus were a broader industry issue, and added there could be more “enforcement action to follow”.

“We’ve had a deep look at the practices of many superannuation trustees and we are going to be putting out a public report about the work and our findings early in the new year,” Court said in an interview.

“We took action in relation to Cbus because we were concerned that those surveillances and investigation really revealed what is a longstanding and systemic issue that has had a very deep impact on thousands of members and their families.”

The litigation against Cbus will be a test case, as it is the first time ASIC has sued a corporate entity for delayed claims handling. Court said it was too early to speculate on what, if any, penalty the court imposes, but it could be “quite significant”.

In a report lodged with ASIC last year, Cbus claimed the delays led to members losing about $20 million. Court said the regulator did not understand what that figure related to, but it believed the value of benefits not paid to members within a reasonable timeframe would have “far exceeded that”.

A Senate committee on Thursday will now have the opportunity to grill Fok, who initially declined to appear before the parliamentarians, claiming he feared he could jeopardise an independent review the prudential regulator ordered the fund to undertake.

Committee chair, Liberal MP Andrew Bragg, said he would question Fok on the fund’s connection to the CFMEU – which has been placed into administration after this masthead revealed widespread criminal infiltration and corruption – the ASIC investigation, and Cbus chair Wayne Swan’s $500 million commitment to the Housing Australia Future Fund.

The Australian Prudential and Regulation Authority in August ordered Cbus to commission an independent review of whether three CFMEU-linked directors are fit to sit on the fund’s board and had acted in the best financial interest of members.

In a letter to Fok, Bragg advised him he could explain to the committee why he was unable to answer questions on the APRA-ordered review.

“After a lot of back and forth I’m pleased they accepted the invitation of the committee,” Bragg said.

Fok will also be grilled on whether Swan, a former federal Labor treasurer, should be held accountable for the alleged failings given his role as chair. Court told a press conference in Sydney she would not be making any comment on Swan.

Two years to begin processing claim

The sister of a former Cbus member told The Age and The Sydney Morning Herald on Wednesday it took the fund two years after her 40-year-old brother’s death to begin processing his death benefits claim.

The family is still battling the super fund to gain access to the $500,000 in his superannuation account more than three years after he died.

“My mum rings up and she follows it up, and they say, ‘Call back in two more weeks’, but she’s 79 this year and she gets emotional every time,” she said, speaking on the condition of anonymity so as to not jeopardise the claims process.

“She doesn’t sleep for the next two nights, she has to keep bringing it up, and it wasn’t exactly the nicest of deaths.”

She said Cbus’ treatment of her family after her brother’s death added to their trauma.

Superannuation and insurance lawyer Paul Watson, from Berrill and Watson, said funds had an obligation to act in their members’ best interests, and that included processing claims in a timely manner. “The people who are lodging these claims are invariably either vulnerable people seeking to claim disability insurance or someone who has lost a loved one – in both instances they need the money and they need it urgently,” Watson said.

Treasurer Jim Chalmers would not comment on the allegations against Cbus because they are before a court, but said the case showed regulators were doing their job.

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