APRA urges scrutiny of insurance design and definitions

Group insurers and superannuation funds have been told they need to review their insurance benefit design and definitions to deliver better member outcomes.

The Australian Prudential Regulation Authority (APRA) has written to both the insurers and the superannuation funds following its review of claims handling arrangements, with APRA member, Geoff Summerhayes saying the regulator had identified a number of areas where insurers could improve practices to better meet expectations.

The APRA analysis was released in parallel with the Australian Securities and Investments Commission's report on its review of life insurance claims handling practices — something which grew out of the Government's response to allegations levelled against CommInsure.

The APRA letter outlined the areas needing improvement as including:

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Reviewing insurance benefit design and definitions with a stronger focus on delivering insurance benefits appropriate for members at an appropriate level of cost;

• Better sharing of information between insurers and trustees. For example, information that could be shared more readily includes claims data and trends, and regular reporting on key performance indicators (KPIs);
• Closer co-operation and alignment between trustees, insurers, and reinsurers to optimise outcomes for beneficiaries; and
• Clarifying the approach to claims in the claims philosophy of both the insurer and trustee to improve claimants' understanding of how claims will be managed.

Summerhayes' letter said many insurers had told APRA they had projects underway to improve claims processes and claims handling, and also addressed benefit design.

"APRA is monitoring the progress of these reviews, along with the governance processes around these changes, and expects key risks, including legal risk, to be recognised and actively addressed," the letter said.

"Reviews of claims processes should focus on how valid claims can be paid as quickly as possible, while being vigilant to identify instances where claims processes result in inappropriate outcomes for claimants and rectify them."