The prudential regulator has raised concerns over a number of poor practices it has observed within the group insurance market.
In a speech to the Actuaries Institute in Sydney, APRA deputy chairman Ian Laughlin said practices which were of concern included overly generous underwriting concessions and poor “data capture and management”.
Mr Laughlin said these practices have been observed in a group risk market that has some “inherent challenges”.
“For example, some individual plans are extremely large, which can influence behaviour and practices in tenders by both incumbent and prospective insurers because of the consequences of winning or losing the business,” he said.
“As another example, there is a lack of industry experience [in] investigations and research to provide objective benchmarks and good practices, and to help identify trends."
These issues within the group and retail insurance markets are the result of insurers focusing on sales and distribution, he argued.
“The advent of questionable practices often has been driven by the desire to score well in product ratings (by 'ratings houses') in a bid to attract business from advisers,” Mr Laughlin said.
“Not only can this undermine sound insurance management, but it often will result in features that are not necessarily needed or wanted (or understood or appreciated) by the customer.”
Mr Laughlin also highlighted that the market for group insurance has grown “enormously” over the years.
“[This is] mainly due to the success of the industry superannuation fund movement, and so the prizes in terms of business volumes are great,” he said.
“In turn, the market power of the large industry funds is considerable, and over the years this power has been wielded to great effect on premium rates and product features."
Financial and insurance services continued to have the highest gender pay gap out of any Australian industry in 2017–2018 at 30.3 per cent...
The corporate regulator has told the Hayne royal commission that it is at a loss over how to successfully prevent misconduct in financial se...
APRA has announced the terms of reference for the upcoming review that will examine the regulator’s enforcement strategy. ...