The Federal Court has mandated that United Super Pty Ltd, the trustee of the Construction and Building Unions Superannuation Fund (Cbus), pay a penalty of $23.5 million due to significant failures in processing death benefits and insurance claims. This ruling follows revelations that thousands of members and claimants faced unreasonable delays, impacting over 7,000 Australians during sensitive and distressing times.
The penalty surpasses the $18.5 million in revenue that United Super reported for the 2024 financial year. In addition to the fine, Cbus is expected to compensate affected claimants approximately $32 million for lost earnings and improperly charged fees. The Australian Securities and Investments Commission (ASIC) has expressed deep concern over the consequences of Cbus’s failures, emphasizing that the prolonged delays have intensified the distress faced by individuals navigating personal tragedies.
Impact on Claimants and Regulatory Response
ASIC Deputy Chair Sarah Court highlighted the real harm suffered by Australians due to Cbus’s inadequate claims handling. “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,” stated Ms. Court. She underscored the necessity for timely and accurate decisions, particularly when individuals are coping with grief or life-altering injuries.
Cbus was aware of increasing claim volumes and had received complaints from its customers regarding prolonged delays. This situation has led to heightened scrutiny from ASIC regarding claims processing and member services, marking these areas as enforcement priorities.
In his judgment, Justice O’Callaghan noted, “Delays in the payment of benefits under insurance products can have serious and unacceptable consequences for affected members and claimants.” He referenced a specific case involving the widow of a Cbus member who publicly shared her frustration on ABC radio after facing a 15-month delay in processing her late husband’s death benefit claim. Following her media outreach, Cbus initiated an investigation that ultimately led to the breach report submitted to ASIC.
Claims Processing and Governance Failures
As of June 30, 2024, Cbus ranked as the ninth largest superannuation fund in Australia, managing over $95 billion in total assets. Justice O’Callaghan pointed out that, given its size, Cbus should have maintained robust processes to ensure compliance with legal obligations and to promptly address any errors in claims processing.
Between October 2022 and November 2024, Cbus outsourced its claims processing to Australian Administration Service Pty Limited (AAS). However, Justice O’Callaghan noted that United Super ultimately bore responsibility for the outsourcing arrangements and that various executive and board committees were informed of AAS’s failure to meet agreed service levels.
The Court’s findings revealed that between March 27, 2023, and May 1, 2023, between 48% and 56% of death claims, comprising 438 to 479 cases, had been unresolved for over 365 days. Additionally, between 38% and 43% of total and permanent disability claims, numbering 391 to 409, had also been pending for more than a year.
The Court determined that Cbus violated the Corporations Act by failing to manage death, terminal illness, and TPD claims efficiently and fairly. Furthermore, it was found that Cbus failed to report critical issues to ASIC within the mandated timelines. Reports that were due on March 3, 2023, and July 20, 2023, were not submitted until August 5, 2023, following public criticism aired on ABC Melbourne Radio.
As part of the ruling, Cbus has also been ordered to contribute $500,000 towards ASIC’s legal costs and is required to undertake a compliance program. This program will necessitate expert assessments to ensure that Cbus has implemented appropriate systems and processes for handling claims moving forward.
The significant penalty imposed on Cbus serves as a reminder to the entire superannuation industry about the importance of accountability and the need to prioritize the welfare of members, particularly during times of vulnerability.
