The Australian Securities & Investments Commission has made 34 recommendations to improve the way death benefit claims are handled by Australia’s superannuation providers, demanding better customer service and faster response times, improvements to the monitoring and reporting of claim time-frames, increased support for First Nations customers and more compassion treatment of vulnerable customers during the claims process.

It follows a review of the handling practices of 10 providers, which revealed a range of systemic failures, including excessive delays and poor customer service, gaps in trustee data and reporting, and “ineffective and insensitive” communication with customers.

Association of Superannuation Funds of Australia (ASFA) chief executive Mary Delahunty said the industry was already taking steps to improve its claims practices, but acknowledged there was more work to do to meet community expectations.

“The superannuation sector knows we have let down some of our members and their families at a time when they needed us, and we are sorry,” she said. “While the majority of our members and their families have a seamless experience with death benefits claims, we know we need to do better to make sure this is the experience of as many people as possible. As a sector, we are committed to keep working until we get it right.”

ASIC investigated the claims handling practices of 10 trustees over a two-year period ending in March 2024.

It included industry super funds Australian Retirement Trust (ART), Rest and Hostplus, retail funds run by MLC, Colonial First State and AMP, as well as public sector funds like Aware Super. However, it excluded AustralianSuper and construction industry fund Cbus, which are currently subject to legal proceedings in the Federal Court over alleged delayed processing of thousands of death benefit claims.

ASIC’s report revealed industry funds were the worst offenders in delaying payouts, led by the $93bn industry super fund Rest, which paid out just 8 per cent of death claims within 90 days. Colonial First State’s trustee Avanteos was the best performer at 48 per cent.

“There’s also a key role for government to remove regulatory red tape to further speed up claims handling for members – that’s why we strongly advocate urgent legal reforms to enable digitised binding death nominations and legal recognition of the kinship structures of First Nations members.”

Spokesmen for Rest, ART, Brighter Super, MLC and Commonwealth Superannuation Corporation (CSC) all said the funds had made improvements to their claims handling processes over the past 12 months, since the end of ASIC’s two-year review period.

“Since then, we have introduced a dedicated team who look after death-related claims for all ART members,” an ART spokesman said.

Rest chief service officer Brendan Daly said: “Since the time of the ASIC data collection in 2024, we’ve made significant improvements to the speed of our death benefit claims handling and have now tripled the number of claims resolved within 90 days.

“We have also reduced the number of open claims at 180 days by a third and expect to continue resolving claims at this pace, or more quickly, going forward.

“Death claims are often complex with multiple beneficiaries and in the absence of a binding death benefit nomination, often require us to wait for more information from a claimant or take certain actions to properly investigate a claim.”

A Brighter Super spokesman said its process improvements had delivered a three-fold increase in claims closed within 90 days.

“We have proactively introduced new internal processes including workflow monitoring systems, expanded approval authorities for our claims team and reduced paperwork for smaller claims, whilst enhancing our online beneficiary nomination processes, member communications and trust deed,” the spokesman said.

A Commonwealth Superannuation Corporation (CSC) spokesman said it had continued to fast-track claims and improve communication with claimants.

“Further improvements are in progress, and we will continue to work towards reducing processing times to better meet the expectations of our customers.”

Addressing media in Melbourne on Monday, ASIC chair Joe Longo described the report as “one of the most significant reports we’ve produced in my time at ASIC”, and put the industry on notice, calling on super trustees to “flex their muscles and fix their failures”. “The way we see this is the super funds’ homework and we’ll be watching,” he said. “The fundamental issue here is a leadership issue, and so from my perspective it really is a governance issue – boards have failed to pay proper attention to their data, to their systems and processes, and if they took those steps, then they’d be able to provide this service.”

Mr Longo left the door open to further legal action if funds fail to improve their performance.

“We don’t rule out the possibility of more court cases. It remains an enforcement priority for ASIC to address matters involving poor member or customer service,” he said. “Today, our focus is death benefits, but there are a range of services that members of superannuation funds expect to receive, so you can expect ASIC to continue to shine a light on this topic, and whether that involves more litigation, that’s a possibility.”

ASIC found 78 per cent of claims reviewed had delays caused by processing issues within the trustee’s control, while more than a quarter involved poor customer service, including phone calls not being returned or queries dismissed.

Funds that handled claims in-house fared better than those who outsourced, ASIC said.

Outsourced administration has been at the forefront of the latest member service failures: both Cbus and AustralianSuper, currently being sued by the corporate cop over lengthy delays in processing death claims, outsourced these services to MUFG Pension & Market Services, formerly known as Link.

While both have laid the blame squarely on their administrator, ASIC has repeatedly told funds that responsibility for member services lies firmly with the ­trustee.

Ms Delahunty said many of ASIC’s 34 recommendations were already being enacted through the implementation of higher industry standards laid out in ASFA’s death benefits payments service standard, with recent AFCA data pointing to a drop in complaints over the past 12 months.

This article first appeared in The Australian.