Heather Gray

Superannuation funds are being questioned about why there has been a growing number of customers experiencing lengthy delays in claims handling over the past year.

Complaints to the ombudsman about superannuation were up by a third to 6,957 in the financial year ended June 30, 2023.

In particular, complaints about delays in releasing super to a surviving spouse or other beneficiaries has more than tripled from 72 to 267 complaints.

There is no stipulated timeline around payments from super funds in the payment of a death benefit. Meanwhile, a new version of the Life Insurance Code of Practice came into effect on 1 July, 2023. The voluntary code means life insurers (including those that provide disability insurance through super) are agreeing to speed up the claims process.

But voluntary codes clearly aren’t working, with a public outcry from complainants in mainstream media outlets in recent weeks leading to questions from the broader financial industry about what’s causing the delays to understand what’s being done to improve response times and how subsequent reputational damage can be avoided.

Australians have revealed delays of a year or even longer to receive death benefits and insurance they are entitled to after the death of a loved one in media stories.

Aware Super blamed data migration issues as it transitioned from using a third party contractor for its delays in one media story, while CBUS was also forced into a public apology and to quickly resolve complaints after a customer spoke to the ABC. In some cases, lawyers have been hired to extract entitlements from super funds.

But Super Consumers Australia director Xavier O’Halloran says the delays are systematic issues that attract a string of consumer complaints.

A report into member experience released by the Australian Securities and Investments Commission (ASIC) earlier this year had already highlighted the need for super funds to reduce frictions in the claims handling process that makes it unnecessarily stressful or onerous for members and beneficiaries who may already be impacted by sickness, injury or the death of a family member.

And while the report points out that trustees have taken steps to enhance the claims handling process, the report also pointed out that the superannuation industry needs to do more given that the number of disputes relating to insurance in super claims remains relatively high.

Superannuation Ombudsman Heather Gray admits that there are no timeframes in the law for payment of a death benefit, other than it must be paid as soon as is practicable.

Three months is reasonable

Gray has publicly admitted that resourcing, administrative changes or the complexity of claims was often the issue when there are complaints about delays.

“Death benefit claims can also vary in complexity. In a straightforward case, we suggest three months is a reasonable period of time. However, in a complex case, we would expect this to take longer,” Gray says.