Superannuation death benefits need tougher time limits, says industry groups

The government should implement a time limit on super funds paying out life insurance claims, super support groups say.

Super fund members and families are frustrated by insurance claims.

Government rules giving superannuation funds time limits to pay out life insurance claims should be introduced, and three months is seen as a reasonable time frame to send families their money, super support groups say.

That is less than one quarter of the time taken in many claims by $94bn industry super giant Cbus, which is being sued in the Federal Court by financial services regulator ASIC over late and mishandled payments.

ASIC’s allegation that more than 6000 Cbus members had claims delayed by more than 12 months has infuriated consumer groups, financial advisers, and members of Cbus and other super funds who have struggled with strung-out insurance claims.

Super Consumers Australia says the problem is widespread in the sector and there is a clear lack of leadership.

Cbus is ASIC’s initial target, but more are expected. Picture: Supplied

“We are now calling on the government to mandate standards for super funds’ member services like claims handling,” Super Consumers Australia advocacy manager Susan Quinn said.

“It’s critical that the government steps in on behalf of millions of Australians.

“The Assistant Treasurer has told funds to lift their game, but we’re still waiting. Mandatory standards will make it very clear how long super funds have to decide a claim, and how they should treat people in the process.”

SCA said regulators have been collecting data about super fund insurance claims handling, but have not made it public.

“People have no idea which funds are better than others when it comes to insurance claims and disputes,” Ms Quinn said.

“It’s a crucial function of super funds and yet we’re all left in the dark. We’re again calling on APRA and ASIC to shine a light on which funds need to step up for their members.

“Mandatory standards, plus public accountability, are the only way to stop the distressing experiences we hear about so often.”

Negative publicity surrounding the Cbus case is expected to lead to a flood of claim complaints being made public by frustrated members and their families.

The Association of Superannuation Funds of Australia recently released guidance notes and policy proposals around death benefit payments, but these did not cover time frames for payouts.

ASFA’s policy proposals included calls for electronic binding death benefit nominations, harmonisation of death certificate details, and government agency support to locate potential beneficiaries.

Its guidance note said most benefit payments were made within a three-month time frame, “with 91 per cent of death benefit claims paid within two months of being lodged, and 98 per cent within six months”.

It said the Australian Financial Complaints Authority had noted that three months was a “reasonable time frame for finalising a straightforward benefit payment”.

However, some scenarios could be complex and take more time, it said.

ASFA CEO Mary Delahunty said the super industry was taking steps to improving death benefit payouts to members and she was confident there would be “significant improvement for Australians”.

She said about 10,000 death insurance and 36,000 disability insurance claims were processed each year.

ASFA CEO Mary Delahunty expects “significant improvement”. Picture: Ian Currie

“ASFA has spent a significant amount of time working closely with our members to identify what can be done, from a practice and policy perspective, to lift the consumer experience, particularly in the area of death benefit claims,” Ms Delahunty said.

Ms Quinn said Cbus needed to explain its mess.

“The fund has over 900,000 members and, as a default, their members pay for insurance,” Ms Quinn said.

“In its marketing material Cbus says its insurance is tailored to meet the high-risk working conditions of people working in construction and allied industries, yet ASIC alleges that an extraordinary 50 per cent of payments were delayed by more than 12 months.

“Their words and actions are completely out of whack.”

Originally published as Superannuation death benefits need tougher time limits, says industry groups