AustralianSuper sued by ASIC over staggering delays to death benefit payouts for almost 7000 families

The corporate watchdog has launched a second prosecution of AustralianSuper, this time accusing the industry superannuation giant of dudding the families of almost 7000 deceased members.

Hot on the heels of copping a $27 million Federal Court fine for failing to merge 90,000 dormant accounts, AustralianSuper is now being accused of breaching the Corporations Act by not processing death benefit claims efficiently, honestly and fairly.

The Australian Securities and Investments Commission claims AustralianSuper took between four months and four years to assess at least 6897 death benefit claims.

And in its new Federal Court action, ASIC claims the $300 billion-plus fund breached super laws by failing to pay at least 792 claims as soon as practicable after the members’ death.

ASIC deputy chair Sarah Court said the alleged misconduct by Australia’s biggest super fund had “profound impact” on a lot of people in a “ particularly difficult time in their lives”.

“It has, in our view, betrayed the trust of AustralianSuper’s customers and their families,” Ms Court said.

ASIC chair Joe Longo told a governance conference in Sydney that the case was a “demonstration of what can happen when there is not adequate oversight of systems in an organisation”.

“This matter is about protecting vulnerable Australians and their families,” he said. Senior regulators have raised a series of concerns about some big super funds outsourcing and not providing sufficient resources to meet their customer service and compliance obligations.

The Federal Court last month fined AustralianSuper $27m for a decade of failures under laws aimed at merging dormant, forgotten or unwanted super accounts.

The regulator launched a Federal Court action against Cbus in November last year accusing it of failing to act efficiently, honestly and fairly in the processing of more than 10,000 disability or death claims from September 2022 onwards.

In its latest action, ASIC alleges that AustralianSuper’s claims handling failures ran from July 2019 to October last year. In 254 cases, AustralianSuper allegedly took between 15 and 213 days to provide the claim form.

AustralianSuper told The Nightly it was “considering ASIC’s claim carefully” — but then tried to shift the blame to COVID-19. A spokesman for AustralianSuper said a “sharp increase” in member deaths and the “significant impact” on staffing numbers during the pandemic resulted in a backlog in processing death benefit claims.

“We recognised this and developed a strategy with our service provider to clear the backlog of claims,” he said.

AustralianSuper was not satisfied with how quickly the backlog was being cleared and made the “significant decision” to bring claims processing in house, he said.

Ian Silk was the chief executive of AustralianSuper from 2009 to October 2021, when the top job was taken over by the fund’s former business development boss and chief risk officer Paul Schroder.

ASIC said in its Federal Court concise statement that the fund entered a claims processing agreement with service provider Link in June 2019.

The statement outlines a variety of internal discussions from mid-2020 about processing delays, including Mr Silk saying in May 2021 he was “far from impressed” with the backlog.

The fund’s chief quality officer was allegedly warned in May 2022 it could be breaching its Corporations Act obligation to do all things necessary to meet its service obligation.

AustralianSuper received 3857 complaints about delayed processing of death benefit claims from March 2020 to September 2023. Link and AustralianSuper had repeatedly failed to meet agreed service targets.

The fund allegedly failed to take “prompt and appropriate action” to deal with Links’ non-performance and to ensure sufficient resources were available to service the growing number of claimants.

In a statement, Ms Court said it was the responsibility of fund trustees to ensure sufficient resources were available to service members and claimants. “Accountability cannot be outsourced,” she said.

The AustralianSuper spokesman said the fund had invested $120m in service improvements and had launched an in-house bereavement centre in April last year.

AustralianSuper now had 75 case managers ushering death claims through the entire process, leading to a “significant reduction” in claim processing times, he said.