Natalie Peng, The University of Queensland

Does your pension fund also offer you insurance? Many of us are automatically enrolled without even realizing it. Now the way super funds deal with these claims has been thrust into the spotlight.

Australia’s corporate watchdog – the Australian Securities and Investments Commission (ASIC) – has put our $3.9 trillion superannuation sector on notice, launching legal action against one of the world’s largest super industrial funds of the country.

Tuesday, ASIC alleged that Cbus – which manages more than $85 billion on behalf of more than 900,000 Australians – has been too slow to process millions of dollars in death and disability benefits, leaving many families in prolonged financial uncertainty.

ASIC Deputy Chair Sarah Court said in a statement:

We allege that Cbus failed its members and claimants when they were most vulnerable, and we are taking this case to protect all of those vulnerable Australians trying to access the financial support to which they are entitled.

In response, Cbus apologized for delays and announced a new compensation program for affected members.

But at a press conference last week, the court said the way claims were handled remained a “problem”.broader question» in the pensions sector. She said the regulator could take further action against other funds early next year.

If true, it raises pressing questions. Are Australia’s big funds doing enough to protect and care for their members when it matters most? And what are your rights?

The case against Cbus

ASIC allegations focus on Cbus processing a number of applications for death benefits and total and permanent disability (TPD) insurance.

The regulator says that since September 2022, more than 10,000 members have been affected by significant delays in processing and paying claims – including 6,000 lasting more than a year.

This would have resulted which represents a financial loss of approximately $20 million for members.

ASIC also alleged that the administrator of Cbus – United Super – failed to report the situation to ASIC within the 30 day period required by law and failed to “take all reasonable steps” to ensure that its reports did not were not materially misleading.

The case comes at a bad time for Cbus. The pension giant’s high turnover among senior executives, its ties to the embattled CFMEU union and other governance issues have led some analysts, like those at Morningstar, to raise questions find out if Cbus is equipped to effectively manage the complex needs of its members.

A safety net in danger

Many Australians are automatically enrolled in life and disability insurance through their superannuation. This is designed to provide a financial safety net for members and their families in times of hardship.

These benefits can provide crucial support if a member dies, faces a terminal illness, or becomes unable to work due to a disability. For those who rely on this support, late applications can cause immense financial and emotional distress, particularly in already vulnerable times.

ASIC’s scrutiny of Cbus reveals a deeper problem: the risk that some funds will prioritize administrative convenience and cost savings over rapid claims handling.

A wake-up call for the industry

ASIC’s case against Cbus highlights a critical point: super funds must act in the best interests of their members at every stage, from managing contributions to paying insurance claims.

Discussions about major policy reform are often aimed at encouraging members themselves to save more for retirement. This approach is too one-sided.

If a broader regulatory crackdown continues, it could be a turning point. Funds will be asked to reassess their governance practices, strengthen their complaints handling procedures and ensure they operate with greater transparency and accountability.

For retirees, this is a reminder that they need to stay informed and engaged with their super funds, understanding their rights and expectations.

What do I need to know about my rights?

If you have insurance from your super, it is crucial to understand your rights and the claims process.

Here are some key steps to ensure a smoother claims experience:

1. Check your coverage: super funds generally offer life insurance, total and permanent disability (TPD) insurance and income protection insurance. Check your super statement or fund portal to confirm your cover details. If in doubt, contact your fund for details of the services.
2. Understanding the claims process: Each fund has its own claims handling procedures, often involving medical evaluations, proof of death or proof of disability. Knowing in advance what documents are required can help avoid delays.
3. Ask for clear deadlines: ask for an estimated time frame when submitting a claim. Although funds must process applications in a timely manner, delays may occur. A responsive fund should provide updates on the progress of your application.
4. Increase delays if necessary: If your claim takes longer than expected, contact your fund’s claims team. If their response is unsatisfactory, consider filing a formal complaint. For unresolved issues, you can contact the Australian Financial Complaints Authority (AFCA), which helps mediate disputes.
5. Hold your fund accountable: as a super member, you are entitled to fast and fair treatment. ASIC’s action against Cbus highlights the importance of regulatory oversight, but members also play a role in holding their funds accountable. Do not hesitate to defend your rights if you believe that your complaint has been poorly handled.

Natalie PengLecturer in accounting, The University of Queensland

This article is republished from The conversation under Creative Commons license. Read the original article.

Are you with Cbus? How did you find the claims process with your super fund? Let us know in the comments section below.

Also read: Super funds under pressure to put members before profits