Super funds’ complaints handling processes are firmly in the spotlight after ASIC identified several problem areas that need fixing.
ASIC found almost 20 per cent of super funds consistently failed to respond to complaints from members within the mandatory 45-day timeline required by Regulatory Guide 271 Internal dispute resolution (RG 271). In almost half of the cases, funds did not provide a reason for the delays to members.
“Fund members find the complexity of the superannuation system and its regulation challenging and have high expectations of their funds in terms of the support they will provide,” AFCA lead ombudsman, superannuation, Heather Gray tells Investment Magazine.
This can result in complaints about fund service quality, which attracted 774 complaints in the last financial year.
Gray believes many superannuation complaints boil down to the quality of trustees’ disclosure and communication.
“Even in cases where AFCA is satisfied the member was given relevant information, we often see that the complaint may have been avoided or resolved more readily if the communication had been more clearly written, timelier or delivered in a different way,” she says.
She urges funds to have what AFCA calls a “resolution mindset” when addressing complaints.
“Complaints resolution works well when the fund, or trustee, focuses on the person with a concern and works with them to unpack and understand what has gone wrong,” she says.
Delays top complaint list
Super funds’ complaints handling delays have typically been the biggest complaint received by the Australian Financial Complaints Authority (AFCA) since it began work in November 2018.
Indeed, AFCA, an external dispute resolution scheme for consumers unable to resolve complaints with their financial services providers, received 1,260 complaints about super fund delays in handling complaints in 2019/20.
This number dropped off to 856 in in the 2020 financial year and 737 in 2021 financial year. Over the three financial years under review, delays outweighed the other top issues of complaint, these being service quality, account administration errors, denials of claims and claims amounts.
When it comes to superannuation products, the top complaints during this period revolved around the administration of accounts, eligibility for insurance cover, the denial of disability claims and the allocation of death benefits.
Funds on notice
Gray’s comments come at a time when super funds have been put on notice for their complaints-handling abilities.
Minister for financial services Stephen Jones previously warned laggards in responding to members’ complaints would find themselves the subject of regulatory attention.
He noted that ASIC’s surveillance found that almost 80 per cent of funds’ complaint management systems were not up to scratch.
Discussing its findings in August, ASIC said one in three trustees reported varying degrees of process failures or errors in their internal dispute resolution (IDR) systems. These included identifying or capturing complaints correctly, omitting mandatory content from IDR response letters or failing to send out IDR responses for some complaints.
ASIC also noted that 10 per cent of the funds it examined recorded less than 10 complaints for every 10,000 members. It said this low complaint rate could be the result of trustees failing to record all member complaints or adopting an inappropriately narrow definition of a “complaint”.
ASIC was also concerned that trustees may be over-applying the limited exceptions to the maximum timeframe or not sufficiently monitoring how long complaints take to resolve.
“It’s clear from ASIC’s review that many super funds are not putting members first,” Xavier O’Halloran, director of Super Consumers Australia says.
“They’ve either not adequately invested or set up their complaints handling processes poorly, which has led to some consumers waiting months to get a complaint resolved.”
O’Halloran believes funds should take a member-centric approach to resolve customer complaints. “With many of the complaints we come across, this isn’t the case and funds resort to a tick-a-box approach,” he says.
“Behind every complaint, there is a real problem for a consumer to be solved. In more serious cases, the way a complaint is handled can alter a person’s life.”
Getting it right
Some funds, however, believe their efforts to improve their claims-handling abilities have paid off.
AustralianSuper was one of the funds that took part in stage one of ASIC’s review which focused primarily on complaint volumes and complaint handling times.
“Following the release of ASIC’s stage one findings, AustralianSuper reviewed its IDR handling metrics about those published by ASIC and remains confident that the fund is managing complaints according to its regulatory obligations and in line with ASIC’s expectations,” says a spokesperson.
‘While regulations require that most complaint types received by AustralianSuper be resolved within 45 days, the fund aims to exceed these expectations and resolves the majority of complaints in well under 20 days.”
Similarly, Jason Murray, CEO of Spirit Super, says his fund’s complaints system is robust and has a lower level of complaints compared to the average fund.
Rest is also confident its complaints management process is functioning well. “Our current rate of responding to complaints within 45 days is greater than 99 per cent,” says its spokesperson.
“The number of complaints lodged with AFCA in financial year 2022 was 24 per cent lower compared to the financial year 2021. Rest members were the least likely to have an AFCA complaint compared to the members of other large or very large superannuation funds (as defined by AFCA).”
Meanwhile, Aware Super’s chief of staff, Katrina McPhee, says almost 95 per cent of complaints received by her fund have been resolved within regulatory timeframes for the financial year to date.
“We’re constantly looking for ways to improve processes and procedures across all facets of the fund,” she says. “The way we handle complaints is no exception, and we’ve made a series of improvements to our complaints-handling processes over the past two years so we can respond to complaints, and act on them, more efficiently.”