ASIC sues AustralianSuper over death claim delays

ASIC is suing AustralianSuper for taking too long to process 7000 death benefit claims, with one one widow saying she only received her payment after making a formal complaint to the regulator.

Clockwise from top left: ASIC chair Joe Longo, AustralianSuper victim Heather Cohen and ASFA CEO Mary Delahunty

The market regulator has lashed the superannuation industry for botching crucial member services and labelled it the poster child for governance failures, after suing AustralianSuper for delaying millions of dollars worth of death claim payouts.

The Australian Securities and Investments Commission on Wednesday also flagged further legal action against other funds was possible. That was met with the ire of the super lobby, which questioned whether such penalties were in the public’s interest and suggesting ASIC’s legal tactics could discourage funds to self-report breaches.

The $355bn AustralianSuper took between four months and four years to assess at least 6,897 death benefit claims over the five years to October 2024, according to documents filed in the Federal Court.

Staff reported the issue to the fund’s board as early as November 2020 and the fund knew it was a systemic issue from at least mid 2021, but failed to notify the regulator until September 2023, just a month before the complaints authority separately sounded the alarm with ASIC.

On at least 752 occasions, AustralianSuper failed to pay out benefits as soon as practicable after a member’s death, ASIC alleges.

In one case, despite having all the information required to fulfil the claim, it took the fund more than three years to do so. In another case, as revealed in November by The Australian, a woman whose sister died from cancer waited 19 months to receive her payout from AustralianSuper.

Heather Cohen, a 77-year old independent retiree from Perth, admits she’s one of the luckier victims of AustralianSuper’s alleged failures.

Heather Cohen at her home in WA. She reported AustralianSuper to AFCA after the death of her husband Neville. Picture: Colin Murty

She received her first benefit payment around seven weeks after the death of her husband Neville last May, but only after raising a formal complaint with the Australian Financial Complaints Authority.

“I made a complaint over the fact that they (AustralianSuper) failed to give me the specific information that I asked for, and it was the only thing that got them to put things in writing,” she said.

“They never told me what their procedures would be, they didn’t tell me what they would be doing or how they would be doing it – they treated their customers like a blasted mushroom.

“In my opinion they just string people along, take as long as they like, and they know that they can do that within the current legislation.”

On top of dealing with the loss of Neville to prostate cancer, Ms Cohen spent seven months trying to get answers to relatively simple questions about her entitlement.

“I started chasing them on it and to get answers I got sent down rabbit warrens, I got tossed from one person to the other. They never gave you a definitive answer in writing,” she said.

“I spent seven months trying to get information out of them regarding how much they were going to pay out.”

ASIC commissioner Sarah Court said the regulator was applying its focus to death benefits and failures in the sector, sending a message to funds that “you need to ensure, first and foremost, to look after your members”.

The ASIC deputy chair said a looming report on death benefit claims, to be released by the regulator in the coming weeks, would detail the breadth of industry failures “and our concerns about this conduct”.

Ms Court said it was “certainly possible” ASIC would file more cases targeting unduly slow death benefits.

“We think it is widespread, and we think it’s having a big impact on members and their families,” she said.

Directors and executives could also be in the firing line, with Ms Court warning ASIC had powers under the Financial Accountability Regime to take action against them.

AustralianSuper is chaired by Don Russell and includes prominent Labor identities such as Michele O’Neil, who is the current president of the Australian Council of Trade Unions.

But the super lobby, the Association of Superannuation Funds of Australia, resisted the attack on funds trying to fix their service failures.

“We’re keeping a close eye on how the regulator is managing to straddle encouraging funds to be honest and transparent and self-report, with the attempted issuing of penalties (as with AustralianSuper),” ASFA CEO Mary Delahunty told The Australian.

“We need to keep in mind whether the regulator issuing penalties as a result of (self-reporting) is what the public needs to see now,” she added.

Speaking at the Australian Institute of Company Directors conference in Sydney on Wednesday, ASIC chair Joe Longo said the sector was the source of increasing complaints about its member services, accusing the leadership of some funds of not having “a grip” on their data and systems.

“The industry is the current poster child for what can and does go wrong when governance fails,” he said.

“Recently, reports of member service failures have become more common. During the past two years, superannuation complaints to the financial complaints authority, AFCA, have been high,” Mr Longo said.

AustralianSuper was responsible for nearly a quarter of all complaints to AFCA about death benefits in 2023 and 2024, according to recent data. It is also Australia’s biggest super fund.

The fund’s members raised more than 1500 complaints with AFCA last financial year, three times higher than the second-worst performer on the complaints front, Australian Retirement Trust.

In response to the court action, AustralianSuper put the blame on Covid-19, saying “a sharp increase in member deaths and a significant impact of the pandemic on staffing numbers saw a backlog relating to the processing of death claims emerge”.

But legal documents show numerous delays through 2019, before the start of the pandemic.

ASIC, headed by chair Joe Longo (bottom right) has sued AustralianSuper, (CEO Paul Schroder pictured top right), for taking too long to process almost 7000 death benefit claims.

“Yes the Covid pandemic was felt in 2020, but this wasn’t fixed until 2024, so in our view that’s not good enough,” ASIC’s Ms Court said.

The fund said it was considering ASIC’s claim carefully and would respond in due course.

The delays began in 2019 one month after AustralianSuper entered into an administration and custody agreement with under-fire administrator Link, now called MUFG Pension & Market Services, which has found itself at the centre of the member service scandals engulfing the sector.

But the regulator has told funds they cannot outsource their accountability, a view repeated by Ms Court on Wednesday: “It is the trustee’s responsibility to ensure sufficient resources are available to service members and claimants, and that adequate oversight of systems is maintained to deliver all services as promised to members,” she said.

AustralianSuper has since established a 75-person bereavement centre to handle high-care tasks such as death benefits. It is in the process of removing MUFG from all member-facing services as it looks to repair its reputation following the damning service failures.

AustralianSuper in November said it would repay $4.2m to the families of deceased members as compensation for taking too long to process their death benefit claims.

That happened days after the corporate regulator sued the $94bn construction industry super fund Cbus for similar delays in paying out death and disability claims.

AustralianSuper was last month fined $27m for failing to merge duplicate accounts held by more than 90,000 members over a nine-year period.

The fund has already compensated affected members $69m for losses suffered due to multiple administration fees, insurance premiums and lost investment earnings, coming from reserves.

ASIC is seeking penalties, declarations, an adverse publicity order and orders for compliance.

Do you have a story to tell about your experience with securing death and disability payments? Write to Cliona O’Dowd at [e-mail], Giuseppe Tauriello at [e-mail] and Angelica Snowden at [e-mail].

Originally published as ASIC sues AustralianSuper over death claim delays