Superannuation giant Cbus ordered to pay penalty for breaking law over death and disability insurance claims handling

Superannuation giant Cbus has been ordered to pay a $23.5 million fine after admitting it breached the law over major delays in its handling of insurance claims.

The super fund will also pay $32 million in compensation to 7,402 people, in response to its problems with claims handling.

In November 2024, corporate regulator, the Australian Securities and Investments Commission (ASIC), put the entire super industry on notice when it announced it was taking Cbus Super to court for failing to process more than 10,000 death and disability claims in a timely way.

Cbus’s trustee, United Super, has publicly acknowledged the delays caused by its conduct and has apologised to members, their families and claimants.

Last month the trustee and ASIC filed documents with the Federal Court, saying the two sides had agreed to a $23.5 million penalty for the fund, which also admitted to breaches of corporate law.

In the Federal Court on Tuesday, Justice David O’Callaghan approved the fine and the compensation both parties had agreed to. 

It brings to a close a major case that has been part of the regulator’s push to see the super sector improve its member communication and customer service standards.

Cbus trustee had admitted its conduct ’caused financial and other harm’ 

According to an agreed position between Cbus and ASIC, released last month by the Federal Court, Cbus’s trustee United Super agreed its conduct “caused financial and other harm to claimants and beneficiaries”. 

Cbus cancels customer’s insurance days before his death

Just 18 days before Russell Wayne Hirst died of a cardiac event in November 2021, superannuation giant Cbus cancelled his insurance policy, leaving the beneficiary of his account in a year-long fight to have her claim approved.

This included causing some claimants and beneficiaries to be unable to meet mortgage and rental payments, and medical expenses as well as ongoing living expenses, the documents said.

It, the documents stated, also resulted in  some claimants and beneficiaries suffering “emotional distress at a difficult time in their lives”.

In his judgement, Justice O’Callaghan said that given the fund was one of Australia’s largest industry superannuation funds for the building, construction and allied industries “it ought to have had more robust processes and systems in place to ensure compliance with key legislative obligations”.

Cbus, which is chaired by former Labor treasurer Wayne Swan, holds more than $100 billion in members’ funds. Mr Swan was previously hauled before a Senate committee and apologised for the fund’s “far from perfect” behaviour.

Cbus chairman Wayne Swan was previously forced to apologise for the super fund’s behaviour.  (ABC News: Matt Roberts)

On Tuesday, Justice O’Callaghan said the fund should have taken steps to “prevent, promptly identify, and correct repeated individual and collective human errors resulting in failures to process claims within a reasonable timeframe”.

“United Super … had the ability to take steps to address the failures in the processing of claims which it did not take,” he said in the judgement. 

“While United Super did take steps in an attempt to rectify the delays in the claims processing services, those steps were inadequate to address the delays.

“The delays continued for an unreasonably long period of time (namely, two years) and caused harm to claimants/beneficiaries in the amount of approximately $32 million.

“United Super has also acknowledged that it had reasonable grounds to believe that a reportable situation had arisen before it lodged breach reports with ASIC, and that it should have filed breach reports within the requisite timeframe.”

He said while the loss and damage incurred by fund members and their beneficiaries was significant, “it must equally be recognised that United Super has already remediated almost all of those affected members and beneficiaries, and has indicated that it will remediate the outstanding affected members and beneficiaries by December 2025”.

He said “United Super did not engage in the contravening conduct to make a profit and did not make any material profit from the conduct”.

He noted because United Super’s trustee risk reserve is funded by fees charged to members, “the imposition of a pecuniary penalty will impact members insofar as it may give rise to the need for future fees to replenish the reserve”.

ASIC has said it will continue to monitor industry progress on how funds treat their members, after a scathing review of death benefit claims handling earlier this year.

ASIC deputy chair Sarah Court said Cbus’s failures “needlessly exacerbated the distress of people who were already in upsetting situations”.

“Thousands of Australians suffered real and avoidable harm because of long delays and systemic failures in the way Cbus handled important and sensitive insurance claims,” Ms Court said.

“When people were grieving the loss of a loved one or grappling with a life-altering injury, Cbus should have ensured timely and accurate decisions were made on their insurance claims.”

Sarah Court says “thousands of Australians suffered real and avoidable harm” because of the way Cbus handled insurance claims.  (AAP: Diego Fedele)

Ms Court said the case sent a message to the whole industry: “You cannot outsource your obligations to your members,” she said.

“The sector should be on notice that ASIC is sharpening its focus.”Cbus says it will ‘manage claims more efficiently and empathetically’

Cbus said in a statement following the court decision: “We want to again apologise to our members, families and claimants without reservation and promise to do better.”

“Cbus has now paid compensation to almost all affected members, their families and claimants,” it said.

“Additionally, the fund has settled a dispute with MUFG Retirement Solutions, its customer service administrator, over issues associated with delays in processing death benefit and insurance claims. 

Cathy was compensated just $29 for super fund’s death benefit delay

Australia’s corporate watchdog calls on superannuation funds to overhaul the way they deal with death benefit claims.

“This resulted in an apology from MUFG Retirement Solutions to Cbus members, their families and claimants, and a financial settlement with the fund.”

It said over the past year, Cbus and MUFG Retirement Solutions have implemented reforms to streamline claims handling and payment services.

It said Cbus doubled the size of its claims team and formed specialist units “to manage claims more efficiently and empathetically”.

“The fund has announced further significant reforms to its insurance claims process, which are expected to remove four to six weeks from processing times for the average death claim and deliver a simpler, more compassionate experience for families,” it said.

“Cbus has cooperated with ASIC throughout the legal process and taken proactive steps to resolve the case quickly as protracted litigation would not be in members’ best financial interest.”

Cbus was also ordered by the court to pay half a million dollars towards ASIC’s legal costs and undertake a compliance program requiring it to obtain expert reports on whether it now has appropriate systems and processes in place.