A former insider has described it as the “side hustle” of Australia’s multi-trillion dollar care industry – where thousands of death and disability claims from injured workers and grieving families are funneled to underpaid, overworked contractors in call centres. is

But the role of super funds as the country’s biggest gatekeepers for life insurance payouts is now under scrutiny amid claims of endemic problems with their outsourcing models.

A scandal involving Cbus, which is being prosecuted by a corporate watchdog for delaying thousands of death and disability claims from injured workers and grieving families, has sparked a wider investigation into the super sector and insurers. Funds have been called for to meet performance-related measures. They depend.

ASIC has warned that its Federal Court case against Cbus is a window into a potentially wider problem in super funds, which are the source of life insurance cover for seven out of 10 Australians.

At the end of 2022, Cbus failed to settle more than half of its death or TPD claims within a year, according to ASIC, which it said added to the distress and financial losses of thousands of vulnerable people.

Cbus chief executive Christian Fok has apologized for the fund’s failure to look after customers but insisted its management and board – chaired by former federal treasurer Wayne Swan – “acted belatedly”.

The fund, which has almost a million members and is the fourth largest in Australia by value, has come under fire from the federal opposition over its links to the scandal-plagued CFMEU.

But its other stakeholders include construction owners group Master Builders and the Australian Council of Trade Unions.

And one of the alleged “root causes” of its failures is a business relationship with an external firm used by other major super funds to help process death and TPD claims.

Australian Administration Services (AAS), a subsidiary of Japan’s Mitsubishi UFJ Trust and Banking Corporation, services more than 40 per cent of Australian superannuation accounts.

AAS has its roots in an organization called Superpartners, which was once jointly owned by major super funds including Cbus, AustralianSuper, Hostplus, and HESTA until it was sold in 2014.

According to ASIC, Cbus last year partly attributed a growing backlog and complaints about its claims to “human resource planning issues and/or failures (at AAS)”.

But ASIC alleges that Cbus failed in its statutory obligations to members to address the AAS’s “poor performance” and address delays, which cost its own admissions claimants $20 million.

It alleged that Cbus was aware of “significant staff turnover” at AAS and was aware of suggestions that some were “not adequately trained”.

AAS is understood to handle insurance claims with a team of 300 people, about 60 of whom deal directly with claimants.

‘Not the work of general administration’

A former insurance claims manager at the organization told the ABC that staff turnover had been a long-standing problem because jobs were stressful and pay was relatively low.

“People are not happy with what they actually have to pay for what they’re being offered,” he said.

“Most of the time, you just get yelled at by people because they’re in a vulnerable situation.

“And we were the front line so all the staff would just fight all the crap from the claiming super members.

The former claims manager, who asked to remain anonymous because he was not authorized to speak publicly, said handling insurance claims seemed to be a lower priority than super funds “because it’s money going out” as capital. Actions generate member returns.

“I would say, the insurance section is kind of a shakeup of the whole super framework,” he said.

“The whole focus is really on the care side, not so much on the insurance side.”

In his experience, the former manager said, it was the insurer who was “really the engine of the whole process because they have to review all the information and make a decision”.

“All [administrator] is to collect the information and send it to the insurer to file the claim, and the insurer does the rest.”

A ‘super fund problem, not an insurance problem’

But according to ASIC figures, the year-over-year bump in claims through Cbus does not reflect the performance of its insurer.

TAL Life Limited, a subsidiary of Japan’s Dai-Ichi Life Group, took an average of 4.2 months to settle TPD claims, and only one month for death claims.

Lawyer Paul Watson, whose firm regularly acts for claimants in disputes, said the numbers showed “the problems we’re seeing now are a superfund problem, not an insurance problem”.

Mr Watson said the Cbus case “puts all super funds on notice that they must provide their fund administrators with adequate oversight to ensure members are getting what they need when they need it”.

“I would expect it to be a wider issue than Cbus,” he said.

“Obviously, ASIC’s case will need to run its course but there appears to be a lack of oversight by the fund administrator here.

“I think you’d be naive to think that an administrator who has performed poorly for Cbus has otherwise performed brilliantly for everyone else.”

In a statement, AAS’s parent company said it was “aware of ASIC’s action against Cbus Super”.

“As one of the many stakeholders involved in the insurance and claims process, we will support Cbus as needed to respond to the action,” it said.

“We will not be providing public comment on this matter at this stage out of respect for the legal process.”

Disability claim ‘incredibly frustrating all the way’

Former Gold Coast health care worker Beck Laxton said she was struggling financially while awaiting the outcome of a TPD claim for an injury she sustained two years ago.

The pathology worker said her career was cut short by a back injury in 2022 while conducting a COVID test in aged care during the pandemic lockdown.

Her super provider Host Plus handles her insurance claims in-house but Ms Laxton said it had not stopped her from receiving wrong advice which had cost her dearly.

“When I started a TPD claim I was told I didn’t qualify for TPD insurance – even though I was paying a premium for it – and I was only eligible to take my super on a compassionate basis,” she said. said .

Ms Laxton said she would not have closed her super account if she had been correctly told she was eligible.

“I’m 45 now, without a retirement fund, it’s terrible, and without the ability to work again, it’s a terrible place for a 45-year-old woman to be.”

Her claim is now being processed by HostPlus’ insurance company, MetLife, which has been “incredibly frustrating all the way through”.

Ms. Laxton said the insurer relied on the worker’s compensation doctor’s account contesting her injury claim, rather than her own treating doctors.

He said he ignored the fact that he tried to return to work before making the claim, his need for ongoing treatment and a pre-existing injury that ruled out corrective surgery.

“Whenever I’ve tried to raise concerns with her about the fairness of my procedure and the claims she’s missed, she falls on deaf ears,” he said. “

“They ignore it. It doesn’t get resolved.

“And every time, it takes them two to three weeks to return the correspondence.

“And now, six months after all this chasing, they’ve come back to me and asked me for a time extension, when I’ve been struggling financially the whole time.

“And there’s no sympathy, no concern on their part.”

Last financial year, MetLife accepted more than 90 per cent of TPD claims, which took an average of four months to resolve.

But it is no comfort to Ms Laxton that her case is out for the insurer.

“We recognize the challenging circumstances that members are facing,” Hostplus said in a statement.

“We are confident that all reasonable steps have been taken by HostPlus and our insurer to seek resolution of this matter. Due process continues to be followed.”

MetLife had no comment.

Prohibition laws ‘much needed’

Mr Watson said insurers had generally improved claims handling since 2017 and it was “no coincidence” that the mandatory life insurance code of practice was introduced.

“There are strict processes to be met and external oversight – this is external oversight by a body made up of consumers and industry people who can objectively assess an insurer’s conduct to ensure that Know that what they are doing is right.” said.

“I think the fact that the life insurance industry has been performing well since the introduction of the Life Code tells you everything you need to know.”

But there is no such check with super funds, which moved away from a voluntary code of conduct in 2021.

“To me, this Cbus case should tell everyone that the superannuation industry missed an opportunity,” Mr Watson said.

“I think there’s a clear lack of code of conduct in retirement, and it’s sorely needed.”