‘Highly inefficient’: How super fund’s death claims backlog ballooned from 700 to 4800

AustralianSuper’s backlog of unpaid death benefit claims blew out by thousands of cases in the years after the COVID-19 pandemic amid failures in the fund’s outsourcing arrangements, including “highly inefficient” work processes, the corporate watchdog says.

The Australian Securities and Investments Commission (ASIC) took the country’s biggest super fund to court in March, saying it delayed the processing of nearly 7000 death benefit claims.

AustralianSuper was sued by ASIC in March over alleged failures in how it handled death benefit claims.Credit: AAP

ASIC is alleging the $365 billion fund breached an obligation to provide financial services efficiently, honestly and fairly, and that it also fell foul of obligations to pay members’ death benefits “as soon as practicable”. The super giant has not yet filed its defence.

In its statement of claim filed with the Federal Court, ASIC has laid out in detail how the backlog of claims ballooned, and how AustralianSuper responded to the growing problem.

ASIC’s case also says AustralianSuper failed to take action to stop charging monthly administration fees from the deceased member’s account during periods of “unreasonable” delay.

An AustralianSuper spokesman said that previously, when members died, administration fees were charged for the services of continuing to manage and administer their account. This approach changed in October last year. Now, the fund will invest a deceased member’s account in its cash option when the fund is informed of their death, and administration fees are no longer charged.

ASIC’s statement says that from May 2020, the firm used by AustralianSuper to process death claims, Link, started experiencing delays in its handling, and in subsequent months, a plan to deal with the backlog was developed.

In November 2020, a committee within AustralianSuper that reported to the fund’s board was informed about the backlog, and by early 2021 the backlog had worsened. In April 2021, Link told the fund there were 700 to 800 claims in the backlog, but a “recovery plan” said the fund expected to have death claims processing return to normal levels within months.

However, the ASIC statement says that between May 2021 and April 2022, the forecast for a return to normal services levels was revised repeatedly.

The issue continued to be raised within AustralianSuper, then in August 2022 the fund wrote to Link regarding “the failures of its outsourcing arrangements to deliver services on time and to the required standards”.

ASIC has launched legal action against a major superannuation fund.Credit: Darrian Traynor

By October 2022, the fund’s backlog of death benefit claims had grown to 4658, and the death claims backlog was raised with AustralianSuper’s board in December of that year.

According to ASIC, an internal report from mid-2023 showed the size of the death claims backlog had grown to about 4800 cases. The internal report recorded that: “The work practices were highly inefficient as a result of many different technology platforms in use, which required manual emails to be sent back and forth to access necessary information to process Death Benefit Claims.”

AustralianSuper reported the backlog to ASIC in September 2023.

ASIC claims the fund failed to have the proper records and systems in place to ensure claims were processed efficiently, and that it failed to adequately manage and monitor Link’s performance, among other allegations.

An AustralianSuper spokesman said the fund would file its detailed defence in accordance with the court’s timeline. He said the fund now had 75 case managers employed in-house, and this team had been in place for more than a year.

“Paying out members’ retirement savings and benefits when they die is one of the most important services we provide, and the fund has taken and will continue to take major steps to significantly improve managing death claims for beneficiaries,” the spokesman said.

“More than 70 per cent of claims are now resolved within our timeframe of four months from first receiving the claim paperwork – the majority of the remaining claims are complex and in nearly all cases we are waiting on information to be supplied to us.”

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