More than 10,000 members and claimants of the Construction and Building Unions Superannuation Fund (Cbus) were impacted by death benefits and total and permanent disability (TPD) insurance claims taking more than 90 days to be processed, according to allegations contained in documents lodged by ASIC in the Federal Court (Media Release 24-251MR).
ASIC alleges that Cbus may have contravened the following provisions of the Corporations Act:
- ss 912A(1)(a) & (5A) by failing to act efficiently, honestly and fairly in the handling of its members’ claims for death benefit payments and TPD insurance payments;
- section 912DAA(1) and (7) for failing to lodge a reportable situation report within 30 days of becoming aware of a reportable situation; and
- Section 1308(5) for failing to take reasonable steps to ensure the breach report lodged on 5 August 2023 was not false or misleading in a material particular.
ASIC is seeking penalties, declarations, adverse publicity orders and orders for compliance matters to be implemented.
What does this mean for General Insurance claims handling?
There are 3 takeaways:
- providing claims handling efficiently, honestly & fairly;
- adequate resourcing & adequately trained staff; and
- failure to take appropriate action.
Providing claims handling efficiently, honestly and fairly.
As set out in ASIC INFO 253, ASIC considers that timeliness is a critical component of meeting the AFSL general obligations to provide claims handling & settling services efficiently, honestly & fairly.
ASIC also consider that industry Code timeframes are useful indicators of what industry considers to be appropriate standards.
In the CBUS matter, ASIC alleges that CBUS management had received reports from their outsourced material service provider that very large numbers of death & TPD claims were (1) older than 90 days & (2) even older than 365 days. Nothwithstanding this data the Board committees did not suggest any cause for alarm.
Takeaway: General Insurers, Underwriting Agencies and their claim service suppliers must not only monitor timeframes under the GI Code of Practice but also take appropriate action when data shows that timeframes are consistently not being met.
Adequate resourcing & adequately trained staff
ASIC allege that the CBus Risk Committee were aware that the material service provider had significant staff turnover & that the provider’s claims processing staff were not adequately trained. ASIC further allege that Cbus failed to implement or adequately implement measures that would address the delays in processing death and TPD benefit claims.
Insurers were on notice from ASIC
ASIC wrote to insurers on 6 March 2024 ‘Obligations of general insurers: Insurance claims and severe weather events‘. In that letter, ASIC set out their expectations of insurers including Insurers are required to sufficiently resource claims handling and dispute resolution functions, and ensure staff are adequately trained. This is a general obligation for AFSL holders.
Relevantly, ASIC also advised insurers our message is that ASIC is watching how insurers support their customers very closely. Evidence of significant misconduct identified through these channels may result in enforcement action.
Takeaway: General Insurers, Underwriting Agencies and their claim service suppliers such as TPA’s must ensure that they have adequate resources to manage claims including peak volumes following events & that such staff are adequately trained.
A key risk is the time taken to onboard new staff and ensure that they adequately trained to provide the claims handling services. This requires pre-planning & predictive resourcing.
Failure to take appropriate action.
With increased focus on monitoring staff and material service providers, boards & senior management are receiving enhanced data.
In the Cbus matter, ASIC allege that Cbus’ failure to properly and promptly identify the risks that its claim processing system posed to members and claimants contributed to its failure to adequately redress the delays in the processing of death & TPD benefit claims.
Appropriate governance includes an AFS Licensee having a Risk & Compliance Committee, operating under a Charter and meeting at least quarterly, to not only receive compliance data but to analyse, interpret, be curious and act upon such data.
Takeaway: all AFS Licencees – insurers, underwriting agencies, TPAs etc must not only formalise a Risk & Compliance Committee but ensure that they receive adequate data and have the skill-set, knowledge, experience & authority to analyse, interpret & act upon such data.
Contact me if you need assistance with your governance or claims handling compliance obligations.