The letter, addressed to all group life insurance chief executives and registrable super entity licensees, said APRA had seen “a re-emergence of concerning developments in group insurance … in relation to premium volatility, availability and provision of data, and tender practices”.
“APRA’s view is that these developments, if unaddressed, are likely to result in poor member outcomes, and adversely impact the availability and sustainability of life insurance through superannuation,” the regulator said.
APRA said 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 is concerned that, should these trends continue, members are likely to be adversely impacted through further substantial increases in insurance premiums and/or a reduction in the value and quality of life insurance in superannuation.
“Indeed, the ongoing viability and availability of life insurance through superannuation may be at risk, adversely impacting access to life insurance cover for a large part of the Australian community.”
APRA said escalating group insurance premiums over the past year had contributed to RSE licensees putting insurance contracts out to tender more frequently and making decisions based on price.
“APRA is concerned that, in some cases, the pricing on which tenders are being won by insurers, whilst initially attractive to RSE licensees, may prove to be unsustainable, and therefore likely to lead to significant increases in premiums at the end of premium guarantee or contractual periods,” the regulator said.
APRA said insurers were also continuing to face challenges accessing timely member data relevant to benefit design and pricing.
“RSE licensees should maintain, and make available to insurers, high quality and sufficiently granular data to support a thorough understanding of fund membership and sound insurance benefit design,” the regulator said.
“Where data and records are incomplete or inadequate, APRA expects these issues to be escalated and addressed.”
The regulator added that “should APRA not see evidence that life insurers and RSE licensees are addressing these matters, APRA will consider further action”.
shame APRA doesn’t have the balls to put health insurers on notice over premium increases.
Maybe APRA should put ASIC on notice for Adviser Fees skyrocketing by 160%. Talk about a parallel universe. The Fed Liberals have seriously lost the plot. The swampocracy is running riot in Canberra since the Libs have been in office. Simply incredible.
“APRA is concerned that, should these trends continue, members are likely to be adversely impacted through further substantial increases in insurance premiums”
So they are insisting on premium increases now.
Makes perfect sense . NOT
Yes farcical situation that was all predicted by independent observers before the Government forced through PYS and PMIF. RSE (Trustees) that are now under Member Outcomes and new best interest tests need to provide they’ve got best deal for members available but this deal is then scrutinized by APRA for pushing for a good upfront deal. APRA has been complaining that insurers aren’t profitable and if they then attempt to create sustainable pricing via price increased then you also get a backhander. Lets not also forget insurers paying out too many dubious mental health claims under pressure to do so post Royal Commission. Not often you get a lose lose
Am I naive in thinking that all insurance really is is pooled risk? If the pool consists entirely of people more likely to claim the system is set up to fail. Does not matter what type of insurance, group, retail, general, health and even PI, they all operate on the same principle. Governments can say what they want but that is the commercial reality; unfortunately “government” and their advisers don’t seem to understand this; they seem to believe it is some sort of magic pudding – more like pass the parcel!
Is it the trustees responsibility that they refer people to an adviser when they want to increase cover, because its in the members interest to have a quality policy, and likely be paying less too.
I think that unless you are a financial adviser you should not be able to just give a super member group cover. It should go straight to advisers to give advice on, even if the super fund pays a small fee for that member. We should have access to group policies as well as retail. Giving people $100k Life/TPD for a meazily fee is ridiculous, they should be able to have a lot more say but access to someone that can actually give the advice. Insurers should not be able to deal direct with a super fund – that is conflict of interest!
That is an excellent point. People should know what they have, what they don’t have, what is available, and what it costs and that information should be given to them proactively.
You’re assuming that those with group insurance are a) actually aware they have insurance and b) want the [i]any [/i][i][/i]insurance at all.
exactly, but why should the super provider or the insurer be able to make assumptions and then do a deal together? Conflict of interest??? Super company is just that….just a super provider…no understandings of insurance or care for the client…. and the insurer is a profit centre trying to ensure the most premium comes through the door without care for how they get it….I see a major conflict of interest between super company and insurer……Clients dont hate Financial Planners they had large corporations that rip people off….. Small Financial planners just cop the brunt….
Who would have thought that premiums would rise when you enact policies that remove default cover which is overwhelmingly held by younger, healthier lives. What an amazing co-incidence that costs rise significantly when governments interfere in the commercial arrangements that insurers and their distribution/marketing channels produce without any clear evidence that there is a problem to begin with.
It’s pretty clear that no one involved in the regulation of insurance actually understands it at all and the end result is higher prices, inferior policy terms less advice.
Eh, members having no idea that they have insurance while paying for it is certainly a problem. I am not sure how anyone can say it is not. People shouldnt be paying for something they dont know they have. Sure, the execution was woeful.
If the group super industry was relying on charging unknowing members to retain margins, they have mispriced from the outset and deserve this.
However, i think your argument is weak and feeds directly into the hands of the insurers that are trying desperately to shirk responsibility for their failings. Insurers have a glowing track record in being incredibly short sighted, both in their pricing and acquisition strategies. It has to change. Unlike the long-term advice we provide, insurers take a very narrow view with an unhealthy emphasis on new business. the few insurers that play in this space drop their pants for the likes of AustralianSuper, to no ones benefit aside from the execs who line their pockets by winning the deal.
Yes, but all will be well for the insurance companies. Labor’s Stephen Jones promised the abolishment of insurance commissions, removing advisers as competitors, leaving the field open for industry funds and Pay TV advertisers to share the spoils. Heaven!
As a consumer, that sounds great to be honest.
What is happening? Neither your comments show in Chrome nor the comment box appear any more – it happened about 3 days ago.
You also seem to be withholding some comments again.
When you opt out all the young members and their premiums stop, with no real change on claim outcomes because they weren’t the ones claiming, insurer profitability nose dives, of course premiums need to increase.
Don’t worry, labour will win an election eventually and increase Medicare to 10% to cover NDIS and our health system so insurance won’t be required. Just like my car rego costs $700, which is $300 for actual rego and $400 for TAC, because it’s somehow my responsibility to pay for all the people out there who don’t have appropriate car or personal insurances in place when they’re involved in an accident.
What ever happened to personal responsibility? Seems to me the responsible citizens of the world are already crowdfunding the rest.
It’s called Moral Hazard… (defined as – “the lack of incentive to guard against risk where one is protected from its consequences”).
Yes, group premiums indeed. But let’s not forget about normal retail premiums with 35% – 45% annual increases common with certain life companies now. They blame reinsurers. I don’t care who’s to blame it is killing the industry (among other things that are killing it).
Remember that old British show Yes Minister!!
One hand of the government – ” ooh better make sure nobody lets their super balance decline due to insurance premiums”
Other hand of the government ” 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.
“[b]For most people, the life insurance they receive through their super fund is the only cover they have to protect themselves and their family[/b][b][/b].”
This is just sad.
And thus we have the reality where members of a super fund that promote group life insurance are not accessing qualified financial advisers that can, in most cases, access retail insurance products at cheaper rates !
In the past, an increase in the premiums charged under group contracts has been linked closely with the claims experience under that contract. This link appears to apply no longer. Premiums under group contracts are increasing whilst experience under that particular group contract is favourable.
A bit rich for APRA to come out like this. The government themselves are the ones causing the issues.
Gee I wonder why group premiums have risen… PYS anyone? Group policies through super are far to cheap anyway, considering the member doesn’t need to be underwritten.
And it all stated with LIF that was going to fix everything…!
Get rid of commissions and then see what happens to premium rates and new business flows next…
this is what happens when you bite the hand that feeds you…. oh and insurance companies lose money in the stock market…