Insurance organisations are better prepared to tackle risks than in previous years, but more work still needs to be done according to APRA deputy chair, Helen Rowell.
Speaking at a Risk Australia conference on Tuesday (30 August), Ms Rowell noted that a risk culture survey the prudential regulator has conducted in the last 18 months, in which over 230,000 employees across 61 insurance, superannuation and banking entities were surveyed.
“Most organisations have more work to do to better understand, assess and strengthen their risk culture. While boards and senior executives may genuinely believe that a sound risk culture is firmly in place, employees may think otherwise,” Ms Rowell said.
“The good news is that a high proportion of employees surveyed said they were encouraged to escalate risk issues promptly and many felt safe to speak up.
“However, approximately one-third of employees did not believe that sufficient resources, including budget, systems, skills, and capacity, had been committed to improving how risks were managed.
“In the life insurance risk culture survey, one in five employees indicated that the roles and responsibilities between the business, the risk function and internal audit were not well understood.”
The “lack of understanding” was also reiterated in a cross-industry Risk Governance self-assessment review conducted by APRA which found that risk accountabilities are not always clear or effectively enforced.
Ms Rowell pledged that APRA will continue to work with stakeholders to improve risk management practices. However, she called on the sectors to stand up.
“However, better risk governance should start in the boardroom, with stronger board oversight and accountability for risk at every level of the organisation,” she said.
“Risk professionals should be actively involved in risk conversations across day-to-day business operations and be enabled to have a strong voice on key decisions.
“And the very best resource for managing risk is your people. Invest in your risk culture and promote ownership of risk right through the business.”
Ms Rowell’s comments come after APRA laid out its corporate plan earlier this month where it pledged to improve the insurance sector with strengthening governance, risk management and business strategy practices noted as key priorities.
According to APRA, this will include addressing deficiencies identified in self-assessments undertaken by general insurers and embedding new capital requirements for private health insurers.
APRA will maintain its focus on promoting the sustainability of insurance products for the long-term benefit of consumers. It also seeks to align the prudential framework with the Australian Accounting Standards Board’s new accounting standard for insurance contracts.
