The federal government will introduce enforceable service standards for large superannuation funds, beginning with requirements for fair and efficient insurance claim processing.

Treasury will work with consumer advocates, regulators and industry stakeholders to develop the standards, to be delivered by regulation, and will release drafts for public consultation.

“The new service standards will start with a focus on the processing of death benefit claims and other insurance benefit claims,” Assistant Treasurer and Financial Services Minister Stephen Jones said. “[They] will also look at the communications the funds are having with members.”

Mr Jones says the government put funds on notice and while there have been improvements, service levels are “nowhere near where we need to be”.

The sector is overseen by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission, which has conducted reviews of super trustees’ practices.  

“These new service standards will ensure that they can drill down into the particulars and they’ll have more to hang their hat on when it comes to enforcing the level of standard that, frankly, Australians have come to expect from any financial institution,” Mr Jones said.

The Council of Australian Life Insurers says it will participate in development of the new standards.

“Life insurance works hand in hand with super to protect people’s nest eggs and allow them to have a dignified and financially secure retirement if they can’t live a full working life,” CALI CEO Christine Cupitt said. “For many people, the life insurance they have in their superannuation is the only type of cover they have or will ever have. People rightly expect their life insurance claims to be dealt with quickly and efficiently.”

The life code of practice mandates a decision within two months of a claim being received, or at the end of any specified waiting period for income-related benefits. For total and permanent disability or death cover lump sum claims, a decision is required within six months.

Super Consumers CEO Xavier O’Halloran says super funds have been taking far too long to do “basics like pick up the phone and pay people the money they are owed”.

“Practically we want to ensure these service standards will make it very clear how long super funds have to decide a claim or process a death benefit, and how to treat people respectfully through the process,” he said.

“We also see room for consumers to be better equipped to judge the customer service at a fund. We need to see more public data and a comparison tool on how funds are performing on customer service.”

The Super Members Council says developing the standards through industry consultation will ensure the government can draw on work already undertaken by the industry.

The council held an industry and government roundtable last February to identify actions to streamline processes, including creating a simple and digital binding death nomination form, ensuring state and territory-issued ID documents are included in the government’s digital verification service and that death certificate details are enough to process claims, and legally recognising Indigenous kinship arrangements and culturally adopted children as beneficiaries.