Excessive delays, poor customer service, and ineffective claims handling procedures in Australia’s superannuation industry have prompted a scathing report from the Australian Securities & Investments Commission (ASIC).

In what’s being called a “landmark death benefit claims handling report,” ASIC has handed down a list of 34 recommendations after findings of multiple failings around death benefit claims handling among industry trustees.

“At the heart of this issue is leadership that doesn’t have a grip on the fund’s data, systems and processes – and ultimately it is the customers who suffer for it,” said ASIC Chair Joe Longo.

The report calls on industry leaders to take ownership of the issues and to flex their muscle to fix them.

Long delays and poor service

Close to eight of 10 reviews (78%) found delays caused by processing issues that were within the trustee’s control, and 27% of the claim files reviewed involved poor customer service. Examples of bad service included failures to return claimants’ phone calls, dismissing queries, and asking claimants for unreasonable information.

The report also looked at how quickly cases were settled, and found the fastest trustees closed 48% of death benefit claims within 90 days, while the slowest closed just 8% in the same period.

“Many of the complaints we read were distressing. We saw deep grief, vulnerability, frustration and genuine suffering.”

Simone Constant, ASIC Commissioner

“This kind of disconnect is unacceptable in any area of corporate Australia, but in the superannuation sector it is particularly serious, because super affects everyone from the boardroom to the living room,” Longo said. “While some trustees performed better than others, tellingly none of the reviewed trustees monitored or reported on their end-to-end claims handling times or performance.”

Multiple failings

Other findings from the review revealed:

• numerous cases of poor service and excessive delays;
• gaps in trustee data and reporting;
• unclear and inconsistent processes and procedures in some cases;
• ineffective and insensitive communication and engagement with claimants; and
• insufficient support for First Nations claimants, including claimants experiencing vulnerability.

“Trustees have not put in place meaningful performance objectives, tracking or reporting, and have failed to approach claims handling with consumers front of mind,” ASIC Commissioner Simone Constant said.

She also disclosed that there was huge variation in claims handling times across the reviewed trustees, and that they had a lot of control on how quickly they resolved the claims.

“This kind of disconnect is unacceptable in any area of corporate Australia … because super affects everyone from the boardroom to the living room.”

Joe Longo, Chair, ASIC

In one of the cases with long delays, a First Nations woman who was grieving the loss of her husband had to wait over 500 days before the trustee paid out around A$100,000 ($63,492) to her. ASIC found that the trustee both failed to respond to her concerns about financial hardship, as well as not supporting her when she had difficulties understanding and navigating the claims process.

“Many of the complaints we read were distressing. We saw deep grief, vulnerability, frustration and genuine suffering,” Constant said.

Even though some of the trustees demonstrated good practices and provided helpful services, Constant still concluded that the “systemic failures by other trustees exposed grieving Australians to added and unnecessary distress after the death of a loved one.”

Letter urging trustees to step up

The Commission announced in early May 2024 that it intended to improve superannuation member services regarding death benefit claims. It was going to review industry practices and compliance with laws regarding superannuation member services. It sent out a letter to superannuation trustees in November, urging on them to improve their death benefit claims handling practices, and address any identified deficiencies around them.

The letter, signed by Constant, addressed the Commission’s “observations of operational failures by trustees,” which included the long wait for death claims.

34 ways to improve

To address the failures, ASIC has outlined 34 recommendations over a range of areas for the superannuation trustees:

• provide better customer service and respond faster to inquiries;
• improve monitoring and reporting timeframes on claims handling processes;
• streamline processes and procedures;
• provide better guidance and training for staff members;
• remove barriers for First Nations members and claimants;
• provide clearer communications and more support for members.

“Grieving Australians should not have to suffer further stress because of the failure of superannuation trustees to approach claims in a timely, clear, and respectful manner,” Constant said.

AustralianSuper sued

However, some actions have already been taken. Earlier in March, the trustee of Australia’s largest superannuation fund, AustralianSuper Pty Ltd, was sued over significant claims failures when it delayed the processing of 6,897 death benefit claims. This allegedly happened between July 1, 2019, and October 18, 2024, with claims processed in periods of between four months and four years.

AustralianSuper also allegedly failed to pay member’s benefits as soon as practicable after death for at least 752 members. Even though all required information was sent, it still took AustralianSuper 1,140 days to make a payment, with other payments taking 438, 412 and 366 days.

“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” said Sarah Court, Deputy Chair, ASIC.

By failing to take all necessary steps to ensure that the services were provided efficiently, honestly and fairly, ASIC alleges that AustralianSuper violated 912A(1)(a) of the Corporations Act, and 912A(1)(c) for failing to comply with the financial services laws on 752 occasions when not paying out claims as soon as practicable.

For these failures, ASIC is seeking penalties, declarations, an adverse publicity order, and orders for compliance matters to be implemented.

AustralianSuper was also fined A$27m ($17m) earlier in February for failing to merge multiple member accounts. The failings went on for almost nine years due to the fund not having appropriate systems and processes in place, which the Court called “inexcusable”, and said that it was a breach of fundamental duties and obligations.

Civil proceedings against United Super

Another case of death claims handling failures took place in November 2024, where civil penalty proceedings commenced against United Super Pty Ltd, the trustee of the Construction and Building Unions Superannuation Fund (Cbus), which also failed properly handle death benefits and total and permanent disability insurance claims.

Allegedly, from September 2022 to November 2024, Cbus failed to proceed claims within the set 90 days – which affected more than 10,000 members and claimants. More than half of those were found to have been waiting more than 12 months.