The Australian Prudential Regulation Authority (APRA) has warned life companies that simply lifting group insurance premiums will not succeed in addressing the core structural issues impacting the industry.
In its latest APRA Insight publication, the regulator has pointed to events in the group insurance sector and the manner in which the major insurers had failed to heed warnings about the manner in which significant price reductions combined with softer underwriting practices and enhancements to benefits would ultimately affect profitability.
The APRA analysis said that in the resultant fall-out, the immediate response of affected life insurers
had been to lift premiums sharply to redress losses.
"Not only has this led to adverse outcomes for superannuation fund members, it does not address the structural problems that caused the situation," it said.
The regulator said that it was in these circumstances that APRA supervisors were coordinating closely across the life insurance and superannuation sectors to ensure that life insurers, reinsurers and superannuation fund trustees were "working together to identify and resolve the underlying causes of the strains in the group risk insurance market".
"Throughout, APRA's message to life insurers and reinsurers has been that boards must ensure they understand adequately the risks they incur in group insurance business, and that risk management processes are adequate for the uncertainties in this line of business," it said.