The Australian Prudential Regulation Authority has released the results of a survey that explored the sustainability of group life insurance in superannuation.
At the end of 2022, APRA conducted a survey encompassing Registered Superannuation Entity (RSE) licensees, life insurers, and reinsurers to gauge industry responses to the sustainability of group life insurance within superannuation. Entities were selected based on size and recent tender activity.
The survey aligned with APRA's directive outlined in a letter dated March 9, 2021, which emphasised the expectation that life insurers and RSE licensees take measures to ensure sustainably designed and priced group insurance offerings. Three areas of concern included premium volatility, data availability, and tender practices.
The survey responses revealed ongoing premium volatility, attributed to recent legislative changes affecting group insurance participation and uncertainties stemming from the pandemic.
Noteworthy practices to mitigate volatility included RSE licensees reviewing premiums post the initial rate guarantee period and life insurers offering stability post-expiry, with price adjustments tied to claims experience.
In the best interests of members, RSE licensees scrutinised insurance terms, identifying and modifying conditions of little benefit to the broader membership. Life insurers addressed sustainability concerns by evaluating product features, aligning offerings with members' needs, and ensuring value for money.
Effective use of data involved collecting comprehensive metrics beyond financial indicators. This included assessing data accessibility and quality, monitoring mental health-related TPD claims, and evaluating concentration risk limits.
Collaboration and communication between regulated entities emerged as crucial, with RSE licensees working with insurers to balance legal duties and sustainability. Clear communication on appropriate outcomes and addressing claim causes further enhanced collaboration.
The survey found minimal progress in the availability and provision of data, with RSE licensees facing challenges in obtaining member data from employers.
Better practices included collaboration between entities, proactive efforts by life insurers to enhance datasets, ongoing data cleansing by RSE licensees, and collaboration with employers to secure diverse data sources.
The survey responses indicated an improvement in tender practices, with sufficient time provided for insurers and reinsurers to engage. Best practices included consulting with life insurers before commencing tenders and adherence to internal pricing hurdles.
APRA encouraged continued collaboration among RSE licensees, life insurers, and reinsurers to enhance access to data points to align benefits with the insurance needs of diverse member cohorts at sustainable premium rates.
In October, APRA released the Australian life insurance industry's claims and disputes statistics, covering the first half of 2023.
