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APRA urges life insurers and superannuation funds to address sustainability of insurance in superannuation

The Australian Prudential Regulation Authority (APRA) has written to life insurers and registrable superannuation entity (RSE) licensees, urging them to address concerning trends and practices in the provision of insurance to superannuation members. 

APRA has noted significant deterioration in group life insurance claims experience in 2019 and 2020, with the potential for the re-emergence of unpredictability and volatility in insurance premiums. APRA is concerned that, if the observed trends and practices continue, members are 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 superannuation. 

APRA expects life insurers and superannuation funds to take steps to ensure that insurance offerings and benefits are sustainably designed and priced, provide appropriate value for members, and adequately reflect the underlying risks. 

APRA has 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 the provision of insurance by superannuation funds is an important component of the value provided by trustees to their members.

“For most people, the life insurance they receive through their super fund is the only cover they have to protect themselves and their family.

“It’s critical that these issues are addressed so sustainable and affordable insurance is available to members through their superannuation fund over the medium to long-term. 

“APRA will continue to engage closely with life insurers and superannuation trustees to monitor their progress as they respond to these issues, with a focus on the interests of current and future superannuation members,” Mrs Rowell said.     

The letter to life insurers and superannuation funds is available on the APRA website at: Sustainability of Life Insurance in Superannuation.

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Contact APRA Media Unit, on +61 2 9210 3636

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For more information contact APRA on 1300 558 849.

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding around $9 trillion in assets for Australian depositors, policyholders and superannuation fund members.