Superannuation giant Cbus cancels customer's insurance days before his death
Gail Ferrari-Hirst spent more than a year in a dispute with superannuation fund Cbus. (ABC News: Peter Healy)
In short:
A woman says superannuation giant Cbus took so long processing her claim that she gave up fighting for life insurance benefits after the death of her former partner.
Cbus has apologised and says it is working at addressing the cause of delays in processing insurance claims.
What's next?
Assistant Treasurer Stephen Jones has told ABC News the behaviour is unacceptable and he is considering legislating mandatory timeframes in which super funds need to respond to claims.
Just 18 days before Russell Wayne Hirst died of a cardiac event in November 2021, Cbus cancelled his insurance policy.
The super fund Mr Hirst had been with for 26 years had been sending him letters by post, as required by laws enacted under the Morrison government, warning his insurance cover would lapse if he did not continue to make contributions to the fund or opt-in to keep his policy.
The mail was never opened.
In the months leading up to his death, Mr Hirst had been in such a deteriorating health condition that he was in and out of hospital.
A few weeks before he died from a heart disease, he went to live with his father in Bendigo.
He had been drawing on his super fund balance to pay for medical expenses and had also been suffering ongoing mental health issues.
Cbus never made a phone call to his former wife, Gail Ferrari Hirst — who was listed as both a nominee and beneficiary on his super fund — to ask why the contributions had stopped and whether it should cancel the policy.
Gail Ferrari-Hirst and Russell Hirst were together for about three decades. (Supplied)
Ms Ferrari-Hirst says one phone call to her would have avoided his policy being cancelled and the nightmare that followed in the months after his death.
"I don't think I'll ever get over any of it. It was just exhausting, she said.
"I just don't understand why they have to make it so complicated."
Ms Ferrari-Hirst says she was living in Melbourne at the time and, due to COVID-19 lockdowns, was unable to travel to Warburton where Mr Hirst was living to check for mail addressed to him.
"I was the nominee on his account as well as the beneficiary," she said.
"I thought, you know, for all intents and purposes, particularly during such a tumultuous time like COVID lockdowns and everything, that perhaps they could have just contacted me and said, 'We've been mailing Russell.' I mean, he had the policy for over two decades."
She would like to see the system changed so the onus is put back on super funds to make sure their members and nominees are properly informed.
"They haven't got any acknowledgement that that person's actually received that correspondence or even read that correspondence," Ms Ferrari-Hirst said.
"I think there needs to be a system in place where they need acknowledgement, either from the member or the person who's [listed] on their account."
Cbus says it was not legally required to contact Ms Ferrari-Hirst but it did have to send four letters to Mr Hirst at nine, 12, 15 and 16 months of account inactivity, as he was the super fund member.
Under laws implemented by the previous Coalition government, with the stated intention of protecting super savings from erosion by fees and insurance premiums, a super fund must deem an account "inactive" if the fund has not received any contributions into the account over a continuous 16-month period or if the member has not elected in writing to keep their insurance cover (opt-in). At this point, the fund must cease insurance coverage.
A Cbus spokesperson told ABC News the information requested at the time was essential, but the Cbus claims team would like to assist Ms Ferrari-Hirst with her queries on insurance cover.
"We apologise unreservedly to Ms Ferrari-Hirst for any distress we have caused," a spokesperson said in a statement.
Gail Ferrari-Hirst was the nominee and beneficiary of her former husband's Cbus super account. (ABC News: Peter Healy)
Government could legislate to force super funds to respond to claims faster
Ms Ferrari-Hirst's case comes as Australia's $4 trillion superannuation industry faces a crackdown from corporate watchdog ASIC after damaging allegations about Cbus.
The superannuation giant has been forced to apologise publicly for taking more than a year to pay thousands of death and disability claims.
ASIC is taking Cbus to court and says it is investigating a host of other super funds.
Assistant Treasurer Stephen Jones told ABC News he was also considering legislating changes that would specify mandatory timeframes in which super funds had to respond to members and or beneficiaries making insurance claims.
"This is absolutely unacceptable," he said in an exclusive interview.
"When somebody is making a death claim, by definition, this is one of the most difficult, tragic parts of their life. The last thing they need is a delay in the process and that claim [because] there'll be financial stress, there'll be other emotional stress.
"They've lost a loved one. [It's] the worst time in their life. These are exactly the sorts of claims that should be being processed promptly."
Stephen Jones is considering legislating mandatory timeframes in which super funds must respond to insurance claims. (AAP: Lukas Coch)
Mr Jones says he put super funds on notice more than a year ago that he was not satisfied with the level of customer service they were providing to their members.
"They've done a pretty good job over the decades of improving people's wealth, but they haven't really been very member-focused organisations," he said.
"I'm considering what can be done to put in place some mandatory standards, whether it's around the area of death and disability claims or other areas.
"But the message is clear: the status quo is not good enough."
'I was becoming physically ill'
While Ms Ferrari-Hirst's case is different to those ASIC is investigating, she says her experience illustrates flaws and delays in the claims process.
Ms Ferrari-Hirst's says she spent about one year fighting Cbus, and people assisting her during the claims process put in a complaint to Liberal senator Andrew Bragg's office on her behalf.
The senator has been chairing a Senate inquiry into super funds, which Cbus chief executive Kristian Fok fronted last week, apologising to its members.
Loading...After months of Ms Ferrari-Hirst going back and forth with the super fund, about $16,000 of super savings Russell Hirst still had in his account was paid out to Ms Ferrari-Hirst, but she says she never got the $100,000 in death benefits.
She says the paperwork Cbus was asking for in the lead-up to her former husband's death was too onerous and she had got tired of fighting Cbus, with her mental health suffering from the constant battle.
Her father also passed away about the same time her former husband died.
"I was becoming ill, like physically ill, from having to deal with it all. I just had to shut it down. Enough's enough," she said.
Ms Ferrari-Hirst says that during the period she was trying to access the insurance benefits, Cbus lost her paperwork, which had been certified and sent by registered post.
"You send it off. And then they say, 'Oh, we can't find it.' Then you've got to go and do it all again and send it off," she said.
"They'd say that it was delivered, but no-one could find it at their office."
She says when she thinks back to that time she feels "angry, furious, not just for us at the time but for everyone, anyone who has to do it".
Cbus told ABC News the fund had been investing in people to support faster claims processing, "with over 50 additional staff placed at Cbus and our administrator across assessments, case management and complaints teams".
A spokesperson said the information requested at the time "was essential for Cbus to be able to … [decide] the claim for the superannuation balance in Ms Ferrari-Hirst's favour".
"We do sincerely apologise for any shortcomings in the communications, or confusion arising from the communications," the spokesperson added.
In relation to ASIC's wider case against the fund, the spokesperson said: "Cbus acknowledges that delays in insurance claims processing times have impacted Cbus members and their families at the worst time in their lives. "
"This is clearly not acceptable, and addressing the causes of these delays has been a key priority for Cbus. "
Call for super funds to face mandatory code of conduct
Amid concerns about poor governance, leading industry lawyers and consumer groups have been calling for a code of conduct, including mandatory timeframes in which super funds must respond to members and their beneficiaries who make disability and death claims.
Tom Cobban, a director of Berrill & Watson Lawyers, has worked his whole career representing consumers in superannuation and insurance claims.
He says that unlike many other financial services, such as banks and insurers, super funds do not have to adhere to a mandatory code of practice or code of conduct.
Tom Cobban would like to see mandatory timeframes legislated. (Supplied)
That means there are no enforceable minimum timeframes in which super funds must respond to members and their beneficiaries who make disability and death claims.
He says up until 2021 there was a voluntary superannuation code of practice designed to ensure funds had certain obligations around their role in insurance claims.
He says if that was mandated by the federal government it would be a step towards fixing problems in the sector.
"It's not just a Cbus issue — in our observation, we see it across the spectrum of super funds," he said.
"These insurance benefits, they're super important. They're a huge source of income for people who have lost a loved one.
"As important as the benefits are, the administration of them is equally as important, and it needs to be quick, needs to be fair, and it needs to be transparent."
Mr Cobban says there needs to be a code that is both enforceable against super funds and clear for consumers.
"What we need is something that's very simple that consumers can access, that tells them how long it should be before a decision is made," he said, noting some claims were more complex than others.
"[It should detail] how long it should be between you contacting your super fund and then you're getting first contact, second contact, third contact, how long between making a claim and having the claim accepted and rejected.
"And I think there should also be clear processes for the exchange of materials, where you have competing people claiming for the same benefits."
Super Consumers Australia director Xavier O'Halloran agrees the issue is systemic, with complaints to the Australian Financial Complaints Authority (AFCA) increasing yearly, indicating widespread problems across the industry.
Last week, corporate watchdog ASIC released data showing that complaints to the financial regulator AFCA about delays in handling death benefits claims increased sevenfold between 2021 and 2023.
Complaints to the AFCA about delays in handling death benefits claims increased sevenfold between 2021 and 2023. (Source: AFCA EDR data and ASIC calculations)
Mr O'Halloran says consumers often must follow up multiple times with funds to get a response, and claims drag out for months, causing severe financial harm.
"This is causing massive harm to people in the community," he said.
"We're seeing people that have lost a loved one or are facing permanent out-of-work situations due to disability being denied or delayed claims for over 12 months. In a lot of cases, that's putting people in severe financial harm."
Xavier O'Halloran says consumers often must follow up multiple times with funds to get a response to their insurance claims. ( ABC News: Mathew Marsic)
He notes that more than one year ago Assistant Treasurer Stephen Jones put super funds on notice that they need to lift their game when it comes to customer service, but funds are still failing.
"What we're calling for is mandatory minimum standards on super funds so that consumers have timeframes for these claims to be handled," he said.
ASIC chairman Joe Longo has so far refrained from calling for mandatory codes and timeframes.
He says it is up to the sector to come up with a code and adhere to it.
"If the superannuation sector came up with such a code that gave additional rights to consumers, then that's something ASIC would welcome," he said.
Call for better customer service from super funds
In the coming weeks the assistant treasurer will introduce other related changes that will allow a new class of financial advisers, with more limited qualifications, who could give retiring people financial advice.
Restrictions on funds giving financial advice were introduced following the banking royal commission and horror stories about fees for no service.
Mr Jones says there are only 16,000 financial planners in the country, and 5 million people who are either at or approaching retirement.
"Those numbers just don't square up," he said.
"We're going to have new avenues available to people for safe, appropriate financial advice, and creating a new category of adviser."
Super funds themselves are in disagreement about what model of funding should be imposed to allow this new category of financial advice — whether it should be an overall administrative cost placed on the super fund's members or a fee charged directly to each member.
Mr Jones did not say which model he preferred but noted: "Members will pay either directly or indirectly".
He says the broader issue of claims processing shows the way funds are dealing with members is "far below the level that I expect and the regulator expects of funds".
Ms Ferrari-Hirst says Cbus made it near impossible to deal with it and it lacked compassion.
Gail Ferrari-Hirst was unable to visit Russell Hirst's home to check his mail during the COVID-19 lockdown. (Supplied)
In the end, despite a coroner's report specifying that Mr Hirst died due to his heart condition, Cbus said Ms Ferrari-Hirst could make a posthumous claim, but still wanted her to go get a doctor to write a report suggesting that his heart condition was the cause of his death.
She believes the coroner's report should have sufficed and argues the requirements are too onerous.
"Russell was really, really ill, [and] the coroner's report was there. We know what he died of. And then they wanted me to go back and speak to specialists again and go through it all again. And I thought, no."
She is calling on super funds to do better.
"When it comes to death claims, particularly people, they need to just be a bit more attentive and just be a bit more compassionate and caring," she said.
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