John Lonsdale, deputy chairman of the regulator made the comments at the Actuaries Summit in Sydney and highlighted that misconduct was done for short term gain.
“Too often the misconduct or poor industry practices highlighted by the royal commission were well-known, yet companies had failed to address them.
“In many cases, that was due to short-term financial gains from practices such as charging fees for no service, or relying on outdated medical definitions,” he said.
Mr Lonsdale’s sentiments were echoed by CHOICE’s chief executive Alan Kirkland who said people in the industry were well aware of misconduct, particularly ‘fees for no service’.
“While many in the public were shocked by the revelation of ‘fees for no service’ these were not revelations for anyone close to the financial industry in general,” he said.
There had been investigations already by ASIC said Mr Kirkland but it should have been managed sooner.
“This was very much a known known, known by institutions, canvassed publicly by regulators and it was so well known that it arguably could have been much better managed at an earlier stage,” said Mr Kirkland.
The result of it not being, is that institutions did not live up to community expectations, said Mr Kirkland, and now the public expected more.
“Institutions now face significant risks when their business practices fail to live up to community expectations about their treatment of customers,” said Mr Kirkland.
APRA was now going to watch more closely for institutions that fell behind industry standards said Mr Lonsdale as the industry worked to rebuild trust.
“Amid clear evidence that risk management remains weak in financial institutions, it is apparent that boards and senior managers need a stronger, louder and more insistent voice on their shoulder urging them to think again. Someone senior and trusted. Someone independent. Someone with expertise in identifying and assessing risks,” he said.
It was no secret that APRA had a new approach to regulating financial entities, said Mr Lonsdale, and in particular was looking at the management of non-financial risks.
“Our role is to ensure the companies we supervise have effective systems and frameworks in place that optimise their ability to meet the financial commitments they make to their customers.
“And like a good actuary, we intend to continually challenge boards and executives to ensure the standards they aspire to are being met in practice, and unnecessary risks avoided,” he said.
Mr Lonsdale said APRA was not striving to dictate how institutions were operated and he urged actuaries to look at the story that the numbers told to find the truth.
“In an environment where financial entities face sharper scrutiny and steeper penalties for mistakes, actuaries must find the story behind the numbers, ask boards and management the difficult questions, and be prepared to challenge them if dissatisfied with the answers,” he said.
Mr Kirkland said entities were facing a permanently changed wel,l but if they approached it correctly it could be a moment of opportunity.
“The events leading up to the royal commission and the process itself have brought about a permanent change in the way consumers understand and think about the system, a permanent change in the political environment in which the system operates and smart institutions will see that as an opportunity,” he said.
