AustralianSuper is alleged to have taken up to four years to process death benefit claims as the country’s largest super fund is taken to court by the regulator – again.
ASIC is suing AustralianSuper Pty Ltd, the trustee of the fund, for delaying processing of 6897 death benefits claims.
It is alleged that, between 1 July 2019 and 18 October 2024, the fund failed to process death benefit claims “efficiently, honestly and fairly”, taking between four months and four years from the date the claim form was returned.
It’s also alleged that the $365 billion fund failed to pay benefits “as soon as practicable” after the member’s death in respect of at least 752 members.
In one example, it took the fund 1140 days to make a payment despite having all the information required to.
And in 254 cases, AustralianSuper took between 15 and 213 days to provide the claim form, according to allegations made by the corporate regulator.
ASIC’s latest action comes after the fund copped a $27 million fine in February for failing to merge duplicate member accounts.
The $27 million penalty was the subject of criticism from a number of retail funds that believed the fine would’ve been larger had they been in ASIC’s crosshairs.
But on the same day the penalty was announced, ASIC chair Joe Longo disputed the regulator had a double standard with its regulatory approach.
“Let me take this opportunity to be very clear: ASIC’s approach to penalties for misconduct is the same regardless of whether the fund is an industry or retail fund,” Longo told an event hosted by the Australian Institute of Company Directors.
“The legal principles are well-established. The primary purpose of civil pecuniary penalties is to deter future misconduct. If a super fund profits by breaking the law, ASIC will seek penalties that are sufficiently high to deter it and others from engaging in similar conduct, regardless of the structure of the super fund.”
Longo pointed to examples including Aware Super’s $20 million fine for fees for no service, Westpac/BT’s $20 million fine for incorrectly charging insurance commissions to members and Colonial First State $20 million penalty for misleading members.
“All of these are examples of not knowing your business,” Longo said.
“Not taking the time to be ‘plugged in’ and connected. At the heart of this issue is leadership that doesn’t have a grip on the fund’s data, systems and processes – and the customers who suffer for it. This kind of disconnect is unacceptable in any area of corporate Australia. But in the superannuation sector it is particularly serious, because super literally affects everyone.”
However, Association of Superannuation Funds of Australia chief executive Mary Delahunty dismissed the criticism from the chair in a media statement on Wednesday afternoon.
“Today’s criticism from ASIC chair Joe Longo that superannuation fund trustees don’t always ‘know their business’ is unfounded and unfair,” Delahunty said, adding the typical balanced fund returned 10.5 per cent to members last year.
“These kinds of returns would simply not be possible if the boards overseeing the governance of super funds didn’t know their business extremely well. The sector has a number of governance models, and each one has been designed to serve the member base within the fund.”
Getting the balance right
In AustralianSuper’s duplicate account case, the judgement from Justice Hespe not only confirmed the $27 million was appropriate in the court’s view, but that if it had been a for-profit entity ASIC would have been justified for seeking a greater penalty if those shareholders had received a material benefit.
Because of the profit-to-member structure, Justice Hespe explained that the interests for members in the fund had to be balanced against the need to penalise the fund.
Instead, the penalty imposed was small enough to not cause detriment to the members that were also the victims of the misconduct, but large enough to deter other trustees from failing to act in member best interests.
The court had accepted that affected members had been remediated by June 2023.
Outsourced problems
AustralianSuper’s insurance woes echo those of Cbus last year, with both funds relying on outsourced administration provider Link Group.
Link delisted from the ASX in May 2024 after its acquisition by Mitsubishi UFJ Trust & Banking Corporation and re-branded to MUFG Pension & Market Services.
In December 2023, AustralianSuper announced that its partnership with Link would be modified and that the fund would instead insource its death claims management through a new bereavement centre. It also aimed to bring additional complaints handling capability online at the end of FY24.
But AustralianSuper and Link still signed a memorandum of understanding to negotiate commercial and contractual terms of an extension to the partnership until at least 2028.
The Australian reported earlier this month the fund had removed Link from all member facing services.
Last November, ASIC initiated civil penalty proceedings against United Super Pty Ltd, the trustee of troubled industry fund Cbus, alleging delays in processing death benefit and total and permanent disability (TPD) claims affecting more than 10,000 members and claimants.
ASIC alleged total and permanent disability insurance claims took over 90 days to be processed.
Coalition Senator and key super sector critic Andrew Bragg dragged CEO Kristian Fok and chair Wayne Swan before a senate committee late last year to scrutinise the fund’s member outcomes, with Fok and Swan effectively passed the buck to their external service providers.
“We are not the only fund that has a challenge with a third-party provider and has delays in the processing of insurance claims,” Swan told the Senate last November.
“This is also an issue elsewhere in the industry, but in saying that we accept complete accountability for the outcomes.”
Having gone largely unscathed in comparison to the retail superannuation and advice sector during the Hayne royal commission, Professional Planner reported at the end of last year that industry funds are “war gaming” a potential royal commission that could happen if a Coalition government is formed in the impending election.
