The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings against the trustee of industry fund Cbus alleging that for more than two years it failed to act efficiently, honestly and fairly in the handling of claims for death benefits and total and permanent disability (TPD) insurance.
The corporate watchdog began the proceedings in the Federal Court yesterday and is claiming more than 10,000 members and claimants of Cbus were impacted by death benefits and TPD insurance claims taking more than 90 days to be processed.
ASIC alleged that from September 2022 to November 2024, the trustee, United Super, failed to act efficiently, honestly and fairly in the handling of insurance claims and despite receiving reports from its third-party administrator, failed to properly assess the scale of the impact on members and claimants.
Cbus has estimated the financial loss to members and claimants to be $20 million and the regulator alleged that when United Super began to take action in October 2022, it was inadequate and insufficient to resolve the issue.
The regulator also alleged that when the matter was brought to the attention of the Cbus risk committee between November 2022 and February 2023, the trustee failed to report the issue to ASIC as required within 30 days of becoming aware of it.
Additionally, ASIC claimed United Super failed to take all reasonable steps to ensure that when the matter was reported to the regulator in August and September 2023, those reports were not materially misleading when they said the contravention was not ongoing.
ASIC deputy chair Sarah Court said delays in claims processing were harmful to members relying on insurance payments and noted in some cases they were longer than a year.
“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’s total claims at that time. We allege they are yet to completely rectify these issues,” Court said.
“The systemic failure by superannuation trustees to deliver essential member services in a timely manner is a key priority for ASIC and we will continue to take action to hold trustees to account.”
While United Super self-reported the delays in processing claims to ASIC in August 2023, the latter is seeking penalties, declarations, adverse publicity orders and orders for compliance matters to be implemented.
Responding to the filing of the case, Cbus issued an apology and asked ASIC to work with it to prevent a drawn-out legal action.
“Cbus Super is sorry that delays have been experienced in the processing of insurance claims made by our members. Regrettably this has added to the distress of members and their families,” the fund said in a statement.
It added it has implemented measures to reduce delays and improve the management of insurance claims and was putting in place a compensation program for affected members.
“Cbus has been cooperating with ASIC during its investigation and notes that ASIC has commenced proceedings in the Federal Court. Cbus will invite ASIC to engage in alternative dispute resolution processes to avoid protracted litigation,” it said.
