Cbus board ‘ultimately responsible’ for handling outsourced death and disability claims, ASIC alleges

Australia’s corporate cop has alleged knowledge of death benefits mishandling at Cbus went all the way to the board, and refuses to accept the industry fund can minimise its role in about 10,000 bungled claims on account of outsourcing.

Cbus chair and ALP president Wayne Swan.

Australia’s corporate cop has alleged knowledge of death benefits mishandling at Cbus went all the way to the board, and refuses to accept the industry fund can minimise its role in about 10,000 bungled claims on account of outsourcing.

The Australian Securities and Investments Commission did not identify the Cbus directors, six of which are trade unionists, but, in a full statement of claim which can be revealed for the first time since it sued in November, ASIC alleged the board knew about increased volumes and complaints but failed to act.

ASIC claimed the Wayne Swan-chaired $94.6bn fund mishandled $20m in insurance money and in some cases took more than one year to pay out death benefits or disability payments to beneficiaries.

ASIC chair Joe Longo. Picture: John Feder/The Australian.

Cbus outsourced parts of its claims processing, including death and permanent disability, to Australian Administration Services (AAS) in December 2020, according to the court documents obtained by The Australian.

ASIC said “Cbus’s board was ultimately responsible for any outsourcing of a material business activity undertaken”.

As well: “Cbus’s board must approve Cbus’s outsourcing policy, which must set out its approach to outsourcing material business activities, including a detailed framework for managing all such outsourcing arrangements.”

ASIC alleged between November 2021 and May 2023, the industry fund’s board committees met and noted Cbus was receiving a substantial increase in death and disability claim volumes as well as complaints about how they were being handled.

According to the regulator’s pleading, the relevant committee simply noted “additional resources had been assigned to deal with the increase in claims and complaint responses, but further action was not required”.

ASIC said on July 18, 2022, Cbus prepared a business case to get three additional people to handle death and total disability benefits.

Cbus and AAS agreed on a plan to address “AAS’s poor performance in meeting service levels... including in relation to the timely performance of tasks” in October of 2022.

ASIC deputy chair Sarah Court. Picture: NewsWire / Martin Ollman

But ASIC alleged that by May 2023, Cbus knew AAS had failed to meet timely performance goals to process insurance claims and failed to clear its backlog.

And in August of that year, ASIC alleged Cbus’s risk committee met and accepted “Cbus had not acted efficiently in the processing of claims”.

The same committee noted “Cbus’s insurance team observed a significant turnover in staff at AAS and identified indicators of lack of training of AAS’s staff around October 2022”, according to ASIC’s court documents.

The regulator relies on other evidence to assert its claim.

A situation report dated August 5, 2023 finds “Cbus in effect acknowledged that the first instance of its failure to process death and TPD benefits claims efficiently, honestly and fairly occurred on 1 September 2022”.

“That was almost 12 months before Cbus rerated the ‘insurance offering’ material risk as ‘high’,” the pleading said.

“Cbus failed to implement, or adequately implement, the measures available to it under the administration agreement in a manner that would reasonably be expected to materially ameliorate the delays in processing death and TPD benefits claims.”

What went wrong inside Cbus: ASIC

Between February 2020 and November 2024, ASIC alleged AAS sent Cbus daily reports about new death and disability claims, a monthly report that contained claim status, age and type of claim, and identified the member.

Yet Cbus allegedly failed to “adequately monitor and manage AAS’s performance”, including by ensuring it had sufficient resources.

ASIC claimed Cbus “failed to ensure that the relevant Cbus board committees had sufficient oversight over and prioritised death and TPD claims processing”.

This included not having all the necessary information and failing to step up when the shortcomings were realised.

“A prudent superannuation trustee in Cbus’s position would have exercised care, skill and diligence ... acted with reasonable dispatch in processing members’ and claimants’ claims, and would not have failed fund members and claimants in the manner alleged,” the pleadings state.

Cbus first lodged a reportable situation with ASIC on August 5, 2023, but ASIC’s filings indicate Cbus claimed AAS failed to accurately report on the performance aspects.

Cbus on Thursday said it was sorry for the pain caused to members and their families by delays in managing claims.

“We have resolved the vast majority and paid additional compensation,” a spokesperson said. “Cbus is committed to doing better and has taken several steps to improve claims management, ensuring members and their loved ones get the support they need.

“Cbus will continue to co-operate with ASIC during this legal process and is committed to an alternative dispute resolution to avoid protracted litigation.”

The spokesperson said there have been no alleged contraventions against the board or any of its directors.

Originally published as Cbus board ‘ultimately responsible’ for handling outsourced death and disability claims, ASIC alleges