Troubled profit-to-member fund Cbus is being sued by ASIC in Federal Court due to alleged repeated failures in handling insurance claims.
The regulator alleges more than 10,000 Cbus members were impacted by death benefits and total and permanent disability (TPD) insurance claims taking over 90 days to be processed.
The proceedings filed by ASIC against Cbus trustee United Super allege that from September 2022 to November 2024, the trustee did not act “efficiently, honestly and fairly in the handling of claims for death benefits and TPD insurance”.
The regulator also alleges despite receiving reports from its third-party administrator, Australian Administration Services, United Super did not properly assess the scale of the impact to members and claimants.
Furthermore, it alleges that when a matter was brought to the attention of the Cbus Risk Committee between November 2022 and February 2023, the trustee did not report these issues to ASIC within 30 days as required.
Cbus has estimated the financial loss to members and claimants to be $20 million.
‘Out of whack’
Super Consumers Australia says the court action against Cbus highlights the need for the government to mandate standards for super funds’ member services such as claims handling.
“The fund has over 900,000 members and, as a default, their members pay for insurance,” SCA advocacy manager Susan Quinn said.
“In its marketing material Cbus says its insurance is tailored to meet the high-risk working conditions of people working in construction and allied industries, yet ASIC alleges that an extraordinary 50 per cent of payments were delayed by more than 12 months. Their words and actions are completely out of whack.”
Comments from Shadow Treasurer Angus Taylor and Shadow Minister for Financial Services Luke Howarth echoed the SCA view that there needed to be better governance over superannuation money.
“This is a critical failure from an industry which regularly lobbies to put more restrictions on how Australians can access their own retirement savings,” Taylor said.
“The government must reveal what action it plans to take to ensure this behaviour is not systemic.”
Howarth criticised the Albanese government’s approach to super fund legislation.
“Labor’s approach to super has since followed a theme of protecting their union affiliated, industry super funds and donors with ideologically driven reforms,” Howarth said.
Mea culpa
In a website statement, the fund apologised for the delays in the processing of insurance claims and for causing distress to their members. The fund said it is cooperating with the regulator and will look to settle the matter out of court.
“Cbus will invite ASIC to engage in alternative dispute resolution processes to avoid protracted litigation,” the statement said.
The number of Cbus members with insurance has increased in the last four years due to the introduction of the Dangerous Occupation Exception. The DOE allows workers in dangerous jobs, such as construction, to keep their automatic entitlement to insurance if they were under 25 or with a balance under $6000.
External dispute resolution body AFCA expressed the belief that trustees were getting better at addressing insurance claims in comparison to the previous year, with lead superannuation ombudsman Heather Gray saying funds are “working hard” to increase resources and improve efficiency. However, the number of delays in claims-handing is still “staggering”.
Cbus’ failings to handle death and TPD insurance claims within a reasonable timeframe goes against AFCA’s notion that funds are improving at handling insurance claims.
This comes as the fund is grappling with governance concerns over its relationship with the disgraced Construction, Forestry, and Maritime Employees Union (CFMEU). Prudential regulator APRA has imposed additional licence conditions for the fund to conduct an external governance review in August.
Researcher Morningstar also raised concerns over the recent executive exodus at Cbus, saying the fund’s investment team has a strong track record, but consistency and competitive edges are not identifiable at this point, largely due to a reliance on long-term asset allocation and a refreshed dynamic asset allocation process still being installed.
The fund hired ex-Industry Super Australia boss Bernie Dean as chief strategy officer this month, working alongside chief executive Kristian Fok as the fund fends off the crises.
