A regulator’s review of the superannuation industry’s death benefit claims handling has found failings including excessive delays, bad customer service and ineffective procedures.

A death benefit is the amount remaining in a member’s account when they die, and it may also include group insurance proceeds.

The Australian Securities and Investments Commission says none of the 10 super trustees reviewed over two years to March 31 last year monitored or reported on their end-to-end claims handling processes or performance.

The 10 trustees are responsible for 38% of all member benefits in super funds regulated by the Australian Prudential Regulation Authority.

ASIC chair Joe Longo said: “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 is the customers who suffer for it. 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 from the boardroom to the living room.”

The review found significant variation in end-to-end claims handling times. The fastest trustee closed about 48% of death benefit claims in 90 days; the slowest closed only about 8% in that time.

Of the claim files ASIC reviewed, 78% suffered delays caused by processing issues within the trustee’s control.

In one case, a trustee took more than 500 days to pay a benefit of about $100,000 to a First Nations woman. The trustee failed to respond to her concerns about financial hardship and did not support her when she struggled to understand and navigate the claims process.

ASIC urges the super industry to immediately review its practices and take up the regulator’s 34 recommendations for fixing death benefit claims handling deficiencies.

The recommendations include setting and monitoring performance objectives; documenting processes and procedures; measures for addressing complaints; and supporting First Nations claimants.

ASIC says it will review trustees’ progress following release of the review findings today.

Super Consumers Australia says the review shows funds are failing in their basic responsibilities to members and their families.

CEO Xavier O’Halloran said: “It’s shocking that no fund has set a target for how long it should take to process a death benefit claim. This report confirms what we’ve been hearing from families in crisis: super funds are blind to their own failures, with no targets, no monitoring, and no accountability.”

Mob Strong Debt Help – part of the Financial Rights Legal Centre – has also hit out at the super sector.

Senior solicitor and policy advocate Mark Holden said: “The treatment of First Nations fund members shows the urgent need to legislate guaranteed member standards.

“We applaud ASIC for shining a light on these practices.” 

See the report here.