ASIC probes Australia’s largest super fund over death benefit payouts

The corporate regulator is investigating the country’s largest superannuation fund, AustralianSuper, for taking too long to pay out death benefits to beneficiaries of its deceased members.

The Australian Securities and Investments Commission has formally begun investigating the $355 billion fund for governance failures similar to those that last year led to Cbus being sued in the Federal Court, said a source aware of the probe but unable to speak publicly as they weren’t authorised to do so.

The investigation comes after AustralianSuper started repaying millions of dollars in compensation last year after finding beneficiaries of deceased members were facing lengthy delays to their death benefit claims. Its internal review was conducted amid pressure from the corporate watchdog on super funds to clean up their act and improve member services.

AustralianSuper chief executive Paul Schroder: The corporate regulator is investigating the super fund giant.Credit: Eamon Gallagher

Contacted by this masthead on Wednesday for comment on the ASIC investigation, AustralianSuper’s chief member officer, Rose Kerlin, apologised to members for not “always getting everything right”.

“We identified that we took longer than the fund’s internal target of four months from the date when the claim form was received to process some death claims. We apologised publicly last year and began reimbursing impacted beneficiaries,” Kerlin said.

“We have an unrelenting focus on improving services for members, including opening a new bereavement centre in April 2024 with 75 employees based in our offices to handle death claims with dedicated case managers.”

Days after ASIC started its legal action against Cbus in November, AustralianSuper revealed it would voluntarily compensate the beneficiaries of 7000 members after failing to resolve their claims dating all the way back to May 2020 within four months. It expected remediation would cost $4.2 million, and has so far sent out 3000 letters to claimants and paid out $320,000.

Kerlin said an increase in the fund’s members and rising deaths during the COVID-19 pandemic heaped pressure on AustralianSuper’s systems, and affected assessment and payment timeframes.

While ASIC declined to comment on Wednesday, the regulator has been intensifying its scrutiny of superannuation funds as the sector balloons to $4.1 trillion and complaints about customer service are swelling. In November, ASIC commissioner Simone Constant wrote to funds’ chief executives, warning them to urgently address gaping deficiencies in their handling of death benefit claims.

Constant said super funds did not provide full information about death insurance on their websites, and what was available could not be easily understood or accessible by people with a disability, or those who did not speak English as a first language.

ASIC commissioner Simone Constant. Credit: Michael Quelch

ASIC put 10 funds on notice at the time, and forced them to hand over granular data about their claims handling.

“We have observed operational failures by trustees to gather and analyse data that provides insights into the outcomes experienced by claimants,” Constant wrote. “These failures make it impossible for trustee boards to provide appropriate oversight on their performance when handling death benefit claims.”

Constant said gaping holes in funds’ data collection meant some trustees were surprised at how long they were taking to handle claims – a position the commissioner found “highly concerning”.

Superannuation and insurance lawyer Paul Watson, from Berrill and Watson, said that since ASIC’s high-profile litigation against Cbus three months ago, super funds had shown greater responsiveness when handling claims.

“It’s good there is focus on ensuring these things are done quickly, because we know claims occur at a time when members are at their most vulnerable,” Watson said. “It’s good to see the regulator is making sure things are actioned quickly, and super funds are being held to account.”

At a press conference on its litigation against Cbus, ASIC deputy chair Sarah Court said last year that the regulator believed “this is a broader, industry issue” and it was doing “deep dive surveillance of superannuation trustees’ handling of death benefit claims more broadly”.

ASIC will release its report in the coming months, and follow up with funds towards the end of the year to check on their progress in improving customer service.

This masthead revealed on Tuesday that Cbus has entered into mediation with the corporate watchdog after conceding it failed to identify – and then prevent – delays to the death and disability insurance claims of 10,000 members since August 2022.

More than half of those, relating to about 6500 Cbus members, were still awaiting resolution a year after lodging a claim, ASIC had alleged in court documents.

Chief executive Kristian Fok told a parliamentary committee in November that 80 per cent of the claims subject to litigation had been resolved, with $755 million in benefits paid out. Cbus chair Wayne Swan said last week that 90 per cent had since been paid out.

The legal action against the $100 billion construction fund is a test case, as it is the first time ASIC has sued a corporate entity for delayed claims handling.

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