Death benefit failures exposed grieving families to 'unnecessary distress'

A review of major superannuation trustees by ASIC found that not even one monitored or reported on the full process of death benefit claims handling.

The review of superannuation trustees, including Australian Retirement Trust, Avanteos (Colonial First State), Brighter Super, Commonwealth Superannuation Corporation, HESTA, Hostplus, NM Super (AMP), Nulis (MLC), Rest, and UniSuper, found widespread failures.

ASIC found examples of excessive delays and poor service, gaps in trustee data and reporting, and inconsistencies in some trustees' processes and procedures.

ASIC also noted that communication and engagement with beneficiaries was often "ineffective and insensitive," reinforcing concerns previously raised by Financial Standard, including a case where Rest was accused of showing "zero compassion" to a family struggling to facilitate an insurance payout for a terminally ill loved one with weeks to live.

"At the heart of this issue is leadership that doesn't have a grip on the fund's data, systems and processes - and ultimately it's the customers who suffer...," ASIC chair Joe Longo said.

"This kind of disconnect is unacceptable in any area of corporate Australia, but in the superannuation sector it is particularly serious, because super affects everyone..."

ASIC's review revealed that 27% of claim files reviewed involved poor customer service, including unreturned calls and dismissed queries, while 78% were delayed due to processing issues within the trustees' control. Additionally, 17% of claimants were identified as experiencing vulnerability, and a third of those cases were "handled poorly".

The disparity in claims closed within 90 days was also highlighted, with the fastest trustee resolving 48% of cases within that timeframe, compared to just 8% for the slowest.

ASIC commissioner Simone Constant said while some trustees demonstrated good handling practices and were providing helpful services to claimants, "systemic failures" by other trustees "exposed grieving Australians to added and unnecessary distress".

"Grieving Australians should not have to suffer further stress because of the failure of superannuation trustees to approach claims in a timely, clear, and respectful manner," Constant said.

"Trustees have not put in place meaningful performance objectives, tracking or reporting, and have failed to approach claims handling with consumers front of mind."

Constant highlighted one "distressing" complaint in which one trustee took over 500 days to pay a death benefit of around $100,000 to a First Nations woman who was grieving the loss of her husband.

Constant noted the trustee failed to respond to her concerns about financial hardship and didn't support her when she struggled to understand and navigate the claims process.

"The money from a death benefit can make a huge difference and each day a trustee delays that payment causes real harm to families. Trustees need to do better," she said.

Following the revelation of the "devastating impacts" of poor industry practices, ASIC has issued 34 recommendations to superannuation trustees.

These include improving customer service and response times, improved monitoring and reporting on claims handling timeframes, streamlined processes and procedures, better guidance and training for staff, removing barriers for First Nations members and claimants, and more support for members.

This article first appeared on Financial Standard

Get stories like this in our newsletters.