Further improvements are needed for Australia’s life insurance industry despite its strong position following last year’s good progress, a panel of risk experts said yesterday.
The group life market must improve poor pricing practices and claims experience, Australian Prudential Regulation Authority (APRA) member Ian Laughlin said at the Financial Services Council (FSC) Life Insurance Conference 2012.
APRA was taking a more active role in industry policy, with plans to publish its prudential standards for superannuation consultation shortly, or SPS 250, Laughlin said.
“It will have a specific requirement for trustees to maintain good quality data so that the incumbent insurer and the insurers involved in a tender have a robust foundation,” he said.
Laughlin said simplicity is also crucial for the industry’s development, as the complexity of products and the way the industry manages those products do not help the consumer.
“If we could find a way to stop adding bells and whistles it would make a big difference,” he said.
PricewaterhouseCoopers Australia insurance leader Scott Fergusson said the industry could be developed by looking at how other sectors are achieving smooth claims processing.
“There’re some [lessons] to be gained around how claims are managed from other sectors in the broader insurance space,” Fergusson said.
“Disciplines can be brought into helping the better management disability claims.”
MLC executive general manager insurance Duncan West welcomed APRA’s involvement in the sector as it would create a more sustainable market and would also drive differentiation in the risk market.
“The industry is in need of much more granular detail and real time management information on pricing, underwriting and claims to enable all players in the marketplace to respond really quickly,” West said.
Meanwhile, RGA Reinsurance managing director Pauline Blight-Johnston opened the conference in place of FSC chief executive John Brogden, who was awaiting the government’s vote on the Future of Financial Advice reforms in Canberra.
Blight-Johnston said the council has taken a leadership position by targeting the practice of churning in life insurance.
“Churning is not in the interest of consumers and the FSC has taken a clear view that it’s inconsistent with the statutory requirements of financial advisers to act in their clients’ best interest,” she said.
In August last year, the FSC announced the development of a binding FSC standard to address churning.
It will commence on 1 July 2013 to introduce a consistent adviser responsibility period and prohibit the relaxing of underwriting standards on the transfer on individual policies.
The FSC has designed a replacement business remuneration framework to restrict life insurance companies paying upfront commissions to an adviser more than once within five years per policy, issued where the policy holder has previously received advice as a retail client about that particular life insurance product.
