Cbus Penalized $15.3 Million After Long Delays Leave Thousands Waiting for Payouts

Key Takeaways

• Cbus Penalty: Cbus was ordered to pay a $15.3 million (AUD $23.5 million) penalty for extensive delays in processing death and TPD insurance claims.
• Widespread Impact: More than 7,000 members and claimants were affected, with approximately $20.8 million (AUD $32 million) in remediation paid for lost earnings and wrongfully charged fees.
• Long-Running Delays: Nearly half of all open death claims and more than a third of TPD claims were unresolved for over 12 months between March and May 2023.
• Complaint Triggered the Investigation: A widow’s 15-month delay, raised on ABC radio, prompted Cbus’s internal investigation and breach report to ASIC.
• Corporations Act Breaches: The Court found failures including unreasonable delays, inaccurate claims data, insufficient oversight, poor performance monitoring, and late reporting to ASIC.

Deep Dive

Cbus, one of Australia’s biggest superannuation funds, has been hit with a $15.3 million (AUD $23.5 million) penalty after the Federal Court found the trustee failed to process thousands of death and disability insurance claims in a reasonable time, in some cases leaving families waiting more than a year for decisions at moments when they needed answers most.

The case centers on United Super, the trustee behind Cbus, which admitted that serious system and oversight failures contributed to extensive delays across its insurance claims operations. More than 7,000 members and claimants were affected, many of whom were already coping with a death in the family or a life-changing injury when their claims stalled.

The penalty is notably larger than United Super’s own 2024 declared revenue of $12 million (AUD $18.5 million). It also comes on top of roughly $20.8 million (AUD $32 million) the fund is paying in compensation to an estimated 7,402 people for lost earnings and fees that should not have been charged.

A Pattern of Delays That Reached Breaking Point

ASIC Deputy Chair Sarah Court said the prolonged delays deepened the distress many people were already experiencing.

“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,” Court said, adding that members themselves had been warning the fund about the mounting wait times.

Her message was simple, “You cannot outsource your obligations to your members.”

ASIC has already elevated claims handling and member services failures as enforcement priorities, and Court said the sector should take this case as a signal that the regulator’s attention is intensifying.

A Widow’s Radio Call Sets Off an Investigation

Justice O'Callaghan’s ruling highlighted just how acute the delays had become. One example that drew his attention involved a widow who, after 15 months of waiting on her late husband’s death benefit, phoned ABC radio in June 2023 to describe long stretches with no updates, hours on hold, and no clarity about why the process had stalled.

Her public complaint prompted Cbus to investigate internally, an inquiry that ultimately led to its breach report to ASIC.

The judgment emphasized the gap between the fund’s size and the state of its systems. As at 30 June 2024, Cbus had more than $61.75 billion (AUD $95 billion) in assets and ranked as Australia’s ninth-largest superannuation fund. Justice O’Callaghan said an institution of that scale “ought to have had more robust processes and systems in place” to prevent repeated errors and catch them quickly when they did occur.

And the volume of stalled claims was significant. Between late March and early May 2023:

• 48% to 56% of all open death claims (between 438 and 479 cases) had been open for more than a year.
• 38% to 43% of TPD claims (between 391 and 409 cases) had likewise been open more than 12 months.

Part of the fund’s claims processing was outsourced between October 2022 and November 2024 to Australian Administration Service (AAS). But while AAS handled member communications and documentation gathering, the Court made clear that United Super remained fully responsible for ensuring claims were processed properly.

His Honour noted that by November 2022, United Super executives and committees were already aware that AAS was missing service-level targets, yet delays mounted anyway.

Breaches and Late Reporting

The Court found that Cbus breached the Corporations Act by failing to ensure death, terminal illness, and TPD claims were handled efficiently, honestly and fairly. Specific failures included:

• not taking reasonable steps to ensure claims were processed in a reasonable timeframe,
• not maintaining complete and accurate claims data,
• insufficient committee oversight, and
• inadequate monitoring of AAS under the administration agreement.

The fund also breached the law by failing to report the issues to ASIC on time. Two reports (due on 3 March 2023 and 20 July 2023) were not lodged until 5 August 2023, and only after public criticism aired during the ABC Melbourne radio program.

In addition to the $15.3 million (AUD $23.5 million) penalty, Cbus must contribute $326,000 (AUD $500,000) toward ASIC’s legal costs. The Court also ordered the fund to conduct a compliance program that includes expert reviews of its current systems and processes to confirm whether they now meet legal and operational expectations.

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