No one making a claim on the insurance they hold in superannuation does it for fun. More likely than not, a traumatic event has occurred to prompt them to make the claim, and treating all claimants as “vulnerable” in these circumstances is a founding principle of a new industry-wide claims handling standard.

The head of a working group convened by ASFA to develop the standard, Jocelyn Furlan, tells Investment Magazine that “the concept of ‘default to vulnerability’ is a really important lens to have” when considering insurance claims.

A former chairperson and chief executive officer of the Superannuation Complaints Tribunal*, Furlan says the concept of “situational” vulnerability differs from the typical “structural” vulnerability the industry is used to dealing with.

“Traditionally, with vulnerability right across financial services, people are focused on what I would call ‘structural’ vulnerability, which is English as a second language, some sort of mental or physical disability, sight impairment, those kinds of things,” Furlan says.

“Whereas I think what’s happening to members and beneficiaries who need to make claims on insurance in relation to a death [is] they’re suffering from what I would call situational vulnerability. I’m not sure that we’ve ever really – not just in super but everywhere – developed guidelines for situational vulnerability and had that lens, which I now think is happening more and more.

“I know that some funds have got bereavement centres and those kinds of things, so that’s really helpful, but I think that we should default to a member or a beneficiary making a claim in those circumstances being vulnerable and have that lens through the claims process.”

Work on the ASFA Claims Handing in Superannuation service standard, released this month, started late last year. It was paused while the working group developed a separate standard for death benefit payments, which was released in September last year.

The claims-handling standard was more complicated than the death-benefit standard because “the insurers are involved, and so we needed to think about the making sure that it was complementary to the [Council of Australian Life Insurers] code”, Furlan says.

“We were really clear that this was about trustees’ promises, not insurers’ promises, and we weren’t cutting across the insurer work. And there’s, of course, a number of different models in terms of insurance arrangements, where some funds do some part of the claims process, and there’s administrators involved, et cetera.”

Default to vulnerability

The working group quickly agreed that a default to vulnerability was appropriate because making an insurance claim “is unlikely to be a discretionary action that someone just feels like doing”.

“There is likely to be significant trauma in the background, either the member staring down the barrel of never being able to work again, or it’s a beneficiary who’s lost someone they love in it in a traumatic, premature, unexpected and catastrophic way,” she says.

“We got an agreement around that. It was also pretty well understood that we needed to do something about member service standards generally. The conversation really started with [former Minister for Financial Services] Stephen Jones when the Labor government was first elected, and he had that very first lunch where he said, this is going to be the focus now.”

Furlan says treating all claimants as vulnerable shifts the nature and tone of the communication by a fund.

“It enhances the possibility of having one single person… running the claim from go to whoa, which happens when there’s identified vulnerability,” she says.

“It also means that if the person gives their permission, it can be recorded on the file, so that there’s knowledge on the file of the fact that this person is has identified themselves as being vulnerable because of this situation.

“It probably avoids the perception of an adult-to-adult transaction, like this is just a transaction, and it probably turns it into something more of… a service-provider-to-vulnerable-member-type transaction.”

Furlan says fund members often become distressed and raise complaints against funds when their experience of the claims handling process fails to match their expectations.

“So if you can match expectations with outcome by communication, by empathy, by having the right lens and explaining to members what’s happening, then you’re less likely to get a mismatch of expectation outcome,” she says.

“Some transactions do take a long time, like, if there is a contested death benefit, it may take a very long time because the fighting beneficiaries may never want to agree about who’s going to get the death benefit. But if the member, if the beneficiaries understand that, then it’s less likely to end up at AFCA.”

Furlan says the ASFA standard covers claims for permanent incapacity, even if there is no insured benefit involved.

“Trustees have a really important role to play in terms of early release of superannuation benefits on the grounds of permanent incapacity, regardless of whether there’s an insured component or not,” she says.

Ultimately, and despite the standard, members of super funds rely on their fund setting out to do the right thing and doing it well. ASFA standards are not binding on its members. But ASFA notes that the Australian Financial Complaints Authority has previously said it expects trustees to comply with timeframes set out in the standards. 

“It’s different from developing a code, because a code is mandatory,” Furlan says. It’s better described as “a series of promises, but not enforceable promises”.

“The impetus was to get the sector to set out its voluntary promises in relation to how it would handle death benefits and insurance claims, and also to focus the industry on what might be appropriate member service standards…to really think about better communication with members,” she says.

* This article was edited on 30 July to remove reference to Jocelyn Furlan being chair of the Customer Owned Banking Code compliance committee. Furlan’s tenure ended in February.