What gets measured,

There’s a saying in business that ‘what gets measured, matters’ and while this is arguable in many circumstances, it was evident this week that the saying endures for good reasons. ASIC’s Report 806 “Taking Ownership of death benefits: how Trustees can deliver outcomes Australians Deserve” made for sober reading. It also found that not one of the 10 Trustees reviewed measured end to end cycle times for death claims. In an industry that prides itself on putting members first this was inexplicable - because cycle times clearly both matter and are measurable. So why the disconnect?

Superannuation is a highly regulated industry. Trustees take their roles and their obligations to members very seriously, (nothing in this report disputes that fact) but this can result in a very process driven and risk adverse approach to claims. Death claims are ostensibly simple: has the member died, are there any insurance benefits - if so, eligibility and pre-existing conditions assessments may be required – who should the super balance and any insurance benefits be paid to? Yet even the best performing super fund only settled 48% of death claims within 90 days. For the worst performing fund this was 8% with 52% still not completed within six months.

While in part this is because nothing is ever as simple as it appears on paper and even death claims can be complex, 78% of the reviewed claims had delays that were entirely within the Trustee’s control. Funds do genuinely care, so how did we get here?

Process and Risk Appetite

A tick-a-box approach to claims slows them down. Funds should have a clearly articulated risk appetite in relation to claims, Claims’ assessments should link back to this risk appetite including the extent to which requirements gathering and claims staking need to take place. Frameworks should be in place to assist assessors in determining when and how a process should be followed rather than having them follow processes for processes’ sake. Gathering further evidence and claims staking take time that may be unnecessary to mitigating any real risk. Appetite may vary from Trustee to Trustee but regardless, a weighing of the risk to the member impact needs to be actively considered and balanced appropriately. Currently, we see a lot of measuring adherence to process without measuring impact. At an industry level, the balance is wrong.

Communication

Communication is key. For any type of claim, adequately, empathetically and clearly explaining the process, setting expectations and providing timeframes at the earliest point of contact are critical to good outcomes. As are consistent, timely, proactive and accurate ongoing communication. Ideally a claimant should have a single point of contact. ASIC found numerous instances of inaccurate, difficult to understand, and/or contradictory correspondence that only added stress to claimants at what is already an extremely difficult time.

Third Party Claims’ Management

Hand-offs can add time. While engaging third party administrators may have service and/or cost benefits to members, ASIC’s report makes it clear that serious consideration needs to be given to when and how claims services are outsourced. In-house claims teams demonstrated clear advantages to both assessment times and member experiences. We don’t believe this means claims outsourcing cannot be done effectively, but robust oversight, delegations of authority and reporting need to be in place. Active communications between the fund, the outsourced provider and where applicable, the insurer, need to occur. For the claimant, demarcation lines and hand-offs need to be seamless and third-parties invisible. Outsourcing is only value-adding if it adds service, not time. Claimants are only experiencing one brand – the fund’s – and death claims are the ultimate ‘moment of truth’.

Binding Nominations

Decisions around disbursements can add complexity. We are seeing a clear industry trend towards non-lapsing Binding Nominations. These can have an advantage for both Trustee and member and led to quicker decision making and payment in ASIC’s review. We would posit one caveat – ASIC found a mean of 23% of nominations were invalid at the time of death. ASIC identified that checking of validity up front significantly reduced this rate (in one instance to 4%). However regardless of its initial validity, we would expect that the longer a nomination remains in place, the greater the chance it will become invalid. Ongoing member communication that both details beneficiaries and encourages their updating is also essential or Funds risk trading one problem for another.

Vulnerable Claimants

The industry is not working well enough with vulnerable claimants. Death benefit claims by their nature mean dealing with people at an extremely sensitive and difficult point in their lives and it’s a time requiring the demonstration of utmost good care. Part of this means better identifying and working with claimants that have additional vulnerabilities. ASIC called out concerns in identifying and dealing with First Nations claimants, in particular. We consider this an area where specialist advice and training should be sought. In the meantime, as ASIC pointed out, simple measures such as understanding and properly applying AUSTRAC’s guidance on supporting customers without standard identification can help alleviate some barriers.

Data & Reporting

The industry is not tracking and reporting some things that matter. If we come back to the original premise that ‘what gets measured, matters’, it’s corollary is ‘what matters, gets measured’. Funds must stand back and consider what that means in practice. Just as with processes for processes’ sake, it’s easy to fall prey to metrics for metrics’ sake. Reporting should be purposeful, designed to highlight the successes and deficiencies in your processes and to provide early warnings if things begin to diverge from expectations – be they of the business or the members. Data is meaningful only for the insights it provides. Too often businesses report on what they can or must, not what they should. Metrics need to reflect and encapsulate Trustee obligations, business strategy, risk appetites and member expectations. Start from what is meaningful to the member and work up. If, as an industry, this had been done in the first place, everyone would already be measuring time to payment on death claims. 

How we can help

At Entregar, we know that practical experience matters when you need an independent, objective view of how your fund rates against ASIC’s 34 recommendations and where and how to implement change. We bring an industry experienced, pragmatic, member oriented lens that prioritises, right sizes and makes sure you are meeting your obligations - and your member service goals. Please reach out if you would like some help!