The corporate regulator has launched legal action against United Super over allegations the Cbus superannuation fund trustee failed to “efficiently, honestly and fairly” handle thousands of death and disability claims.

The Australian Securities and Investments Commission has also accused the trustee of non-compliance with the breach reporting regime, under which a “reportable situation” must be flagged with the regulator within 30 days of a licensee becoming aware of it.

The regulator launched civil penalty proceedings in the Federal Court yesterday.

It alleges United Super failed to process death and total and permanent disability claims within reasonable time frames from September 2022 until this month, including failing to properly assess delays encountered by Australian Administration Services, which was contracted to manage the claims. More than 10,000 Cbus members and claimants were affected by the delays, with their claims taking more than 90 days to be processed.

The regulator alleges that, despite receiving reports from Australian Administration Services, United Super failed to properly assess the impact on members. The financial loss to members and claimants has been estimated by Cbus to be $20 million.

Changes to the Corporations Act in 2022 require ASIC licensees to “do all things necessary to ensure [claims handling and settling services] are provided efficiently, honestly and fairly”.

The outcome of the Cbus proceedings will be relevant to the general insurance industry, according to McCabes principal Mathew Kaley.

“Claims handling for general insurance is very much in focus at the moment, particularly in the context of catastrophe claims,” the financial services law specialist told insuranceNEWS.com.au.

“The significance of this case for general insurers is that ASIC, as expected, is showing it will take enforcement action where it thinks an insurer is falling below the standard required for claims handling. The case will also likely provide some guidance on how the obligation to act efficiently, honestly and fairly applies to claims handling.”

He says that obligation involves responding when things go wrong. “In this case, the evidence suggest that the claim delays were not addressed very quickly.”

Cbus says it has implemented measures to reduce delays and is committed to further improving management of insurance claims. It has also established a compensation program for affected members.

“Cbus has been co-operating with ASIC during its investigation and notes that ASIC has ... commenced proceedings in the Federal Court,” the fund said. “Cbus will invite ASIC to engage in alternative dispute resolution processes to avoid protracted litigation.”

See the ASIC court filing here.