Superannuation fund trustee United Super has copped a $23.5 million penalty over delays processing death and disability insurance claims.

The issue affected about 7402 claimants and beneficiaries who suffered losses as a result, the Federal Court says in a judgment.

The Construction and Building Unions Superannuation Fund (or Cbus) trustee must also publish an adverse publicity notice on its website; pay the Australian Securities and Investments Commission’s legal cost of $500,000; and undertake a compliance program with the commission.

“Pecuniary penalties totalling $23.5 million reflect the nature of United Super’s contraventions,” Justice David O’Callaghan said.

“Delays in the payment of benefits under insurance products can have serious and unacceptable consequences for affected members and claimants.  

“The penalties awarded in this case need to be significant enough to send a clear deterrent message to dissuade other superannuation fund trustees, and other Australian financial services licensees generally, from failing to discharge their duties diligently by providing financial services efficiently, honestly and fairly.”

ASIC launched legal action against United Super last year and the trustee admitted it failed to “do all things necessary to ensure that death, terminal illness and total and permanent disability claims … were processed within a reasonable” time between October 2022 and November last year, the court ruling says.

The trustee contracted Australian Administration Service to handle claims during this period, but Justice O’Callaghan notes “ultimate responsibility for elements of financial services which are outsourced remains with the licensee”.

He says the delays “caused harm to claimants/beneficiaries in the amount of approximately $32 million”.

ASIC deputy chair Sarah Court says the outcome sends a message to the industry. “The sector should be on notice that ASIC is sharpening its focus.”

Cbus says it has established reserves to pay the penalty and a provision for one was made in its financial accounts.

“We want to again apologise to our members, families and claimants without reservation and promise to do better,” it said.

“Cbus has now paid compensation to almost all affected members, their families and claimants.”