Does your superannuation fund also provide you with insurance? Many of us are automatically enrolled without even realising. Now, the way super funds handle such claims has been thrust into the spotlight.

Australia’s corporate watchdog – the Australian Securities and Investments Commission (ASIC) – has put our $3.9 trillion superannuation sector on notice, launching legal action against one of the country’s largest industry super funds.

On Tuesday, ASIC alleged that Cbus – which manages more than $85 billion on behalf of more than 900,000 Australians – was too slow to process millions of dollars in death and disability payouts, leaving many families in prolonged financial uncertainty.

ASIC Deputy Chair Sarah Court said in a statement:

We allege Cbus failed its members and claimants at their most vulnerable time, and we are taking this case to protect all those vulnerable Australians trying to access the financial support to which they are entitled.

In response, Cbus apologised for the delays and announced a new compensation program for affected members.

But at a press conference on Wednesday, Court said the way claims are handled remains a “broader issue” in the superannuation industry. She indicated the regulator may take further actions against other funds early next year.

If true, this raises some urgent questions. Are Australia’s big super funds doing enough to protect and look after their members at the times it matters most? And what are your rights?

Read more: After a lifetime studying superannuation, here are 5 things I wish I knew earlier

The case against Cbus

ASIC’s allegations centre on Cbus’s handling of a number of death benefits and total and permanent disability (TPD) insurance claims.

The regulator alleges that since September 2022, more than 10,000 members were impacted by significant delays in processing and payment of claims – 6,000 of whom by more than a year.

This allegedly resulted in a financial loss to members of about $20 million.

ASIC also alleges that the trustee for Cbus – United Super – failed to report the situation to ASIC within the 30-day timeframe required by law, and didn’t “take all reasonable steps” to ensure its reports were not materially misleading.

The case comes at a bad time for Cbus. The superannuation giant’s high senior staff turnover, links to embattled union CFMEU, and other governance concerns have led some analysts, such as those at Morningstar, to raise questions about whether Cbus is equipped to manage the complex needs of its members effectively.

A safety net at risk

Many Australians are automatically enrolled in life and disability insurance through their superannuation. This is designed to offer a financial safety net for members and their families in times of hardship.

These benefits can provide crucial support if a member dies, faces terminal illness, or becomes unable to work due to disability. For those counting on this support, delayed claims can cause immense financial and emotional distress, particularly during already vulnerable times.

ASIC’s scrutiny of Cbus signals a deeper problem – the risk that some funds are prioritising administrative convenience and cost savings over timely management of claims.

A wake-up call for the industry

ASIC’s lawsuit against Cbus underscores a critical point: that super funds must act in the best interests of their members at every stage, from managing contributions to paying out insurance claims.

Super policy reform discussions often centre on encouraging members themselves to save more for retirement. That approach is too one-sided.

If a broader regulatory crackdown goes ahead, it could become a turning point. Funds will be prompted to re-evaluate their governance practices, reinforce their claims management procedures, and make sure they operate with more transparency and accountability.

For superannuation members, it serves as a reminder to stay informed and engaged with their super funds, understanding their rights and expectations.

What should I know about my rights?

If you have insurance through your super, understanding your entitlements and the claims process is crucial.

Here are some key steps to ensure a smoother claims experience:

1. Review your coverage: Super funds usually offer life, total and permanent disability (TPD), and income protection insurance. Check your super statement or fund portal to confirm your coverage details. If unclear, contact your fund for a breakdown of benefits.

2. Understand the claims process: Each fund has its own procedures for handling claims, often involving medical assessments, proof of death, or evidence of disability. Knowing what documentation is required in advance can help prevent delays.

3. Ask for clear timelines: Request an estimated timeline when you submit a claim. Although funds must process claims within a reasonable time, delays can happen. A responsive fund should provide updates on your claim’s progress.

4. Escalate delays if necessary: If your claim is taking longer than expected, contact your fund’s claims team. If their response is unsatisfactory, consider filing a formal complaint. For unresolved issues, you can escalate to the Australian Financial Complaints Authority (AFCA), which assists in mediating disputes.

5. Hold your fund accountable: As a super member, you have the right to prompt and fair treatment. ASIC’s action against Cbus highlights the importance of regulatory oversight, but members also play a role in holding their funds accountable. Don’t hesitate to advocate for your rights if you feel your claim is mishandled.