A review by the prudential regulator has identified a number of issues with the provision of life insurance via superannuation funds.
A review of APRA’s 2013 superannuation prudential framework has found it met its original objectives but must keep evolving to ensure members’ interests are protected.
APRA commenced a post-implementation review of the framework introduced as part of 2013’s Stronger Super reforms in May last year, to assess how it had performed in the five years since it was introduced. Until the package of 13 prudential standards, supporting guidance and reporting standards came into force, registrable superannuation entity (RSE) licensees were not subject to legally binding prudential standards in the same way as other APRA-regulated entities.
The review found the prudential framework had materially lifted industry practices in key areas as governance, risk management and outsourcing. But it also highlighted the need for APRA to continue strengthening prudential requirements in several areas, including board appointment processes, management of conflicts of interest and life insurance in superannuation.
The review noted that many RSE licensees continue to find insurance strategy, design and risk management challenging.
“Expectations of RSE licensees could be further strengthened in these areas, such as the design of insurance offerings by RSE licensees to ensure members are provided with appropriate cover without unduly eroding their retirement savings,” the regulator said.
“The framework could also be enhanced by strengthening the requirements for selecting an insurer, including consideration of any conflicts particularly in relation to related party insurers.”
During roundtable discussions, it was recognised that, prior to the introduction of the prudential framework, RSE licensees lacked adequate insurance expertise and relied heavily on their insurance provider.
“It has taken a number of years for some RSE licensees to build expertise to enable them to appropriately consider matters relating to insurance governance and management,” APRA said.
“Participants recognised that insurance management frameworks for most RSE licensees were not as mature as other elements of the prudential framework, with the concepts in the standard being newer compared to the other risk management standards.”
APRA conducted a thematic review of insurance across RSE licensees in 2015. The review noted that insurance management frameworks were largely compliance focused and did not generally encompass all aspects of an RSE licensee’s business operations relevant to insurance. In particular, APRA observed weaknesses in the ability for RSE licensees to meet data management requirements.
“Linkages between the insurance management framework and the overall risk management framework were also not clear,” the regulator said.
“The thematic review concluded that claims management was generally sound but noted that there was still some room for improvement in governance and documentation of the claims management process within the insurance management framework.”
FASEA has released the results of its April exam session, revealing a drop in pa...
A class action brought against IOOF in the Supreme Court has been discontinued, ...
The government has delayed legislation to introduce a retirement income covenant...