The Australian Prudential Regulation Authority (APRA) today released its submission to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the life insurance industry.
The submission provides an overview of the life insurance industry and of APRA’s activities in the sector, and outlines opportunities for industry initiatives and regulatory reform to address the challenges of legacy products.
The Financial System Inquiry (FSI) recommended the introduction of a mechanism to facilitate the rationalisation of legacy products in the life insurance industry, in recognition of the fact that legacy products become more complex and expensive to administer over time. This can result in increased operational risk to insurers and poor consumer outcomes. APRA continues to support the FSI recommendation, which will require legislative change to implement.
APRA Member Geoff Summerhayes says there is however a great deal more industry can do in relation to legacy products without waiting for a legislative solution.
‘Life insurers need robust systems and processes capable of fairly and accurately administering their books of legacy business, and they have not always invested enough in these,’ Mr Summerhayes said.
‘APRA will continue to increase the pressure on insurers to invest more in this area so their systems and processes are more capable of meeting community and policyholder expectations.’
The submission also highlights sustainability as a key theme underpinning APRA’s recent activity in the industry. A sustainable life insurance industry, with insurers that are financially and operationally sound into the future, serves the interests of consumers. To this end, APRA has strengthened the life insurance prudential framework and heightened its supervisory intensity of life insurers.
APRA’s letter and submission to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the life insurance industry is available on the APRA website.