Industry super fund Cbus ordered to pay $23m over delayed death, disability claims
Industry super fund Cbus, chaired by former treasurer Wayne Swan, has been ordered to pay $23.5m in penalties after taking too long to process thousands of death and disability claims.
Industry super fund Cbus, led by former treasurer Wayne Swan, has been slapped with $23.5m in fines after it was sued by the corporate cop for taking too long to process thousands of death and disability payments.
ASIC first launched legal action against Cbus’ trustee – United Super – late last year for failing to act “efficiently, honestly and fairly” when handling over 10,000 death benefit and disability insurance claims between September 2022 and November 2024.
The Swan-chaired fund, which manages more than $100bn, estimated the financial hit to members and claimants to be about $20m.
Swan is a powerful figure in the retirement funds sector, not only as the chair of one of the largest providers but also as a former federal treasurer and national president of the Labor Party.
He announced last month that he would be stepping down from the presidency role next July, ending his more than 30-year career in politics.
■ MOST READ: Australia’s top young entrepreneurs revealed
Handing down his judgement in Federal Court on Tuesday morning, Justice O’Callaghan ordered Cbus to pay the hefty fine within 28 days.
Cbus will also foot the bill for an independent review of its claims-processing systems and later detail to ASIC which of the recommendations it has adopted.
Justice O’Callaghan said as of June 2024, the fund was ranked the ninth largest superannuation fund in Australia and had over $95bn in total assets.
“As one of Australia’s largest superannuation funds, it ought to have had more robust processes and systems in place to ensure compliance with key legislative obligations, and to prevent, promptly identify, and correct repeated individual and collective human errors resulting in failures to process claims within a reasonable time frame,” he said.
It follows last month’s revelation that the construction industry-backed fund agreed to pay the fine, and that it would pay a further $32m to 7402 beneficiaries after admitting it breached the law by failing to process claims on time.
This was despite Cbus originally filing a defence to ASIC’s case – which included claims the fund’s board knew about an increase in payout complaints but failed to do anything about it – in June, saying that it would challenge the claims as legally “vague and embarrassing”.
ASIC deputy chair Sarah Court said the systemic failure by superannuation trustees to deliver essential member services in a timely manner was a key priority for the regulator.
“We will continue to take action to hold trustees to account,” she said.
“Trustees cannot outsource accountability when it comes to claims handling.
“It is the trustee’s responsibility to ensure there is adequate oversight of their systems and to prioritise the resources necessary to deliver the services they have promised to their members.”
A Cbus spokesperson told News Corp that the fund had established reserves to pay the fine imposed by the court, and that member administration fees had not been increased to cover the penalty.
“We want to again apologise to our members, families and claimants without reservation and promise to do better,” they said.
“Cbus has now paid compensation to almost all affected members, their families and claimants.
“Cbus has co-operated with ASIC throughout the legal process and taken proactive steps to resolve the case quickly as protracted litigation would not be in members’ best financial interest.”
They said the fund had settled a dispute with MUFG Retirement Solutions, its customer service administrator, over issues associated with delays in processing death benefit and insurance claims.
“This resulted in an apology from MUFG Retirement Solutions to Cbus members, their families and claimants, and a financial settlement with the fund,” they said.
“Over the past year, Cbus and MUFG Retirement Solutions have implemented reforms to streamline claims handling and payment services.
“Cbus has doubled the size of its claims team and formed specialist units to manage claims more efficiently and empathetically.
“A new simplified insurance payment process for death benefit payments will also commence from next Monday.”
ASIC alleged that despite the matter being brought to the attention of the Cbus Risk Committee between November 2022 and February 2023, the business failed to alert ASIC within the legally required 30-day window.
They also said Cbus failed to take reasonable steps to ensure its eventual reports to ASIC were accurate, claiming the fund wrongly stated at the time that the breach was no longer ongoing.
Ms Court said by late 2022, more than 6000 Cbus members and claimants had their payments delayed by more than 12 months.
“Extraordinarily, that equates to more than 50 per cent of Cbus’ total claims at that time,” she said.
Ms Court said Cbus’ failures needlessly exacerbated the distress of people who were already in upsetting situations.
“When people were grieving the loss of a loved one or grappling with a life-altering injury, Cbus should have ensured timely and accurate decisions were made on their insurance claims,” she said.
“Not only was Cbus aware of increased insurance claim volumes, but it was also put on notice by its own customers who were complaining about the long delays they were enduring.”
It comes after a Senate inquiry in February tore into Australia’s $4 trillion super sector, calling for sweeping reforms to protect millions of workers’ savings.
More Coverage
Originally published as Industry super fund Cbus ordered to pay $23m over delayed death, disability claims
Lab-grown milk is coming – here’s what it means for mums
