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The Construction and Building Unions Superannuation Fund (Cbus) has declared it has the financial reserves to pay a mammoth $23.5 million penalty imposed today by the Federal Court for “unreasonable delays” in paying out death and disability claims for thousands of members and beneficiaries.
In a statement issued today, Cbus says that it has not increased member administration fees to cover the penalty which been agreed to earlier this month following mediation between the super fund and the Australian Securities and Investments Commission (ASIC).
“Cbus has established reserves to pay the penalty imposed by the court and a provision for an expected penalty was made in our financial accounts,” says Cbus, adding that it has paid compensation to “almost all affected members, their families and claimants”.
The penalty is more than the $18.5 million in revenue United Super, the Cbus trustee, declared in the 2024 financial year.
The Federal Court imposed the penalty against United Super after the super fund admitted to serious failures that caused delays in processing death benefits and total and permanent disability (TPD) insurance claims.
The court found that between 27 March 2023 and 1 May 2023, between 48 per cent and 56 per cent of all death claims had been open for more than 365 days, and between 38 per cent and 43 per cent of all TPD claims had been open for the same period.
ASIC says the actions of Cbus impacted more than 7,000 Australians “in distressing situations”.
The penalty is in addition to a separate Cbus remediation program to pay about $32 million in compensation to the 7,402 affected claimants and members for lost earnings and wrongfully charged fees.
“Delays in the payment of benefits under insurance products can have serious and unacceptable consequences for affected members and claimants,” says Federal Court Justice O'Callaghan, in delivering his judgement a year after the case was brought before the court by ASIC.
O'Callaghan notes one case in which the widow of a Cbus member called into ABC radio in June 2023 to highlight a 15-month delay in processing her late husband's death benefit claim.
After she complained to the media about ongoing poor service, including a lack of communication and extensive periods on hold, Cbus began an investigation that led to the breach report to ASIC.
“As one of Australia's largest superannuation funds, it ought to have had more robust processes and systems in place to ensure compliance with key legislative obligations, and to prevent, promptly identify and correct repeated individual and collective human errors resulting in failures to process claims within a reasonable timeframe,” says O'Callaghan in his decision.
Cbus had more than $105 billion in funds under management at the end of FY25, and is among Australia’s top 10 super funds.
ASIC’s deputy chair Sarah Court says the failures by Cbus “needlessly exacerbated the distress of people who were already in upsetting situations”.
“Thousands of Australians suffered real and avoidable harm because of long delays and systemic failures in the way Cbus handled important and sensitive insurance claims,” says Court.
“When people were grieving the loss of a loved one or grappling with a life-altering injury, Cbus should have ensured timely and accurate decisions were made on their insurance claims.
“Not only was Cbus aware of increased insurance claim volumes, but it was also put on notice by its own customers who were complaining about the long delays they were enduring.”
Court says the Federal Court decision delivers a message to the entire superannuation industry that they need to “get it right”.
“You cannot outsource your obligations to your members,” she says.
“ASIC has increased its scrutiny of claims handling and member services failures, which are both ASIC enforcement priorities. The sector should be on notice that ASIC is sharpening its focus.”
Between October 2022 and November 2024, Cbus outsourced its claims processing to Australian Administration Service Pty Limited (AAS).
However, the court found that United Super, as Cbus trustee, was ultimately responsible for the outsourcing of material business activity.
O'Callaghan also points out that from at least November 2022, a number of United Super executive and board committees were aware that AAS had not met its agreed service levels in relation to the processing of claims.
The Federal Court also found that Cbus contravened the Corporations Act by failing to do all things necessary to ensure death, terminal illness and TPD claims were handled efficiently, honestly and fairly.
On top of the penalty, Cbus was ordered to pay $500,000 towards ASIC’s legal costs and undertake a compliance program requiring it to obtain expert reports on whether it now has appropriate systems and processes in place.
Cbus says a new simplified insurance payment process for death benefit payments will begin 1 December 2025.
“Cbus has cooperated with ASIC throughout the legal process and taken proactive steps to resolve the case quickly as protracted litigation would not be in members’ best financial interest,” says the industry super fund.
“The conclusion of the proceeding this year reflects this.”
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