The prudential regulator has declined to investigate a major retail super fund for hiking insurance premiums by more than 40 per cent despite the federal opposition’s protestations, saying the price rises were “within the range of premium increases” being seen across the industry.
Earlier this month, APRA responded to questions on notice from Senate economic references committee chair and Labor senator Alex Gallacher around whether 42 per cent premium increases to CommInsure products within the Colonial Super Retirement Fund constituted a breach of the fund trustee’s duty to act in members’ best interest.
The fund had hiked fees from $5,494 to $7,804 per year for $500,000 worth of cover and entered into a further three year contract with CommInsure, which Mr Gallacher pointed out was a “related entity” to the fund.
The matter had originally been raised with ASIC in an October hearing of the House economics committee, after which the corporate regulator had informed the committee that APRA had primary responsibility for investigating trustee breaches.
Responding to Mr Gallacher’s questions, the prudential regulator said it did not “review in detail the outcome of every group insurance tender”.
“There are many drivers of premiums for group insurance arrangements, including membership coverage and demographics, claims experience, the nature and type of cover provided and policy terms and conditions,” APRA said.
“There have been changes in many of these drivers in recent years, requiring changes in premiums to appropriately reflect the underlying cost of the insurance.”
The regulator said changes to the SIS Act excluding younger super members from group insurance had also had a significant impact on premium prices across the sector.
APRA said when agreeing terms with group insurers, trustees needed to “balance potentially competing considerations in determining their insurance arrangements, so that levels of cover and terms and conditions are set such that the outcomes for members are broadly appropriate”.
“However, in recent years insurers have experienced losses on their group insurance portfolios, and continued losses could put the ongoing provision of sustainable group insurance at risk,” the regulator said.
“The factors outlined above will have contributed to the increase in premium indicated in the example provided, which is within the range of premium increases that APRA has observed recently across the superannuation industry”.
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