Retirement
APRA puts super insurers on notice
The prudential regulator has written a damning letter to life insurances and super licensees instructing them to address concerning trends and practices that could lead to further hikes in group premiums.
APRA puts super insurers on notice
The prudential regulator has written a damning letter to life insurances and super licensees instructing them to address concerning trends and practices that could lead to further hikes in group premiums.
The letter addressed to all group life insurance chief executives and registrable super entity licensees raised concerns about unpredictable and volatility in insurance premiums.
The regulator stated the current trend is likely to see members be adversely affected through substantial increases in insurance premiums and or reduction in value and quality of life insurance offered through their superannuation fund.
APRA said that following a period of premium reductions and benefit increases for life insurance in super between 2012 and 2016, insurers experienced significant losses and were forced to hike premiums, and that the regulator was concerned recent practices in the group market may see history repeating itself.
“The trends and practices which APRA has observed recently appear similar to those seen in 2012-2016, and have similarly been accompanied by a deterioration in group life insurance claims experience and significant impact on life insurer profitability,” the regulator said.
APRA deputy chair Helen Rowell said the provision of insurance by superannuation funds is an important component of the value provided by trustees to their members.
“For most people, the life insurance they receive through their super fund is the only cover they have to protect themselves and their family.
“It’s critical that these issues are addressed so sustainable and affordable insurance is available to members through their superannuation fund over the medium to long-term,” she said.
APRA said it expects life insurers and superannuation funds to take steps to ensure that insurance offerings and benefits are sustainably designed and priced, provide appropriate value for members, and adequately reflect the underlying risks.
“APRA will continue to engage closely with life insurers and superannuation trustees to monitor their progress as they respond to these issues, with a focus on the interests of current and future superannuation members,” Mrs Rowell said.
The letter to life insurers and superannuation funds is available on the APRA website at: Sustainability of Life Insurance in Superannuation.
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