The Australian Prudential Regulation Authority (APRA) has again outlined its concerns regarding the sustainability of insurance in superannuation to life insurers and registrable super entity (RSE) licensees given the significant recent deterioration in group life insurance claims experience.
APRA said this deterioration in 2019 and 2020 had the potential for a re-emergence of unpredictability and volatility in insurance premiums.
It said if trends and practices continued, members were likely to be adversely affected by further substantial increases in insurance premiums and/or reductions in the value and quality of life insurance offered through super.
APRA said it identified the need for:
- Superannuation trustees to maintain, and make available to insurers, high quality and sufficiently granular data to facilitate sustainable insurance design and pricing;
- Clear insurance strategies developed and maintained by trustees, that reflect a scheme design for default insurance which carefully considers and appropriately balances their members’ needs and the cost of insurance; and
- Tender processes that provide adequate information and time to all participants, to enable them to consult on scheme design and appropriately price the risks and benefits.
APRA deputy chair, Helen Rowell, said it was critical that the issues were addressed so sustainable and affordable insurance was available to members through their super fund over the medium to long-term.