The Australian Prudential Regulation Authority (APRA) has agreed with industry urgings that the implementation date for the Government’s Budget changes to insurance inside superannuation be delayed to allow super funds and insurers to get the necessary adjustments in place.
Giving evidence before the Senate Economics Legislation Committee, APRA officials said they agreed an extension was needed beyond the legislation’s current implementation date of 1 July, 2019, with the regulator’s deputy chair, Helen Rowell, pointing out that while the original date might be appropriate for a single fund, the time-frame was not long enough to accomplish what represents an industry-wide change.
APRA member and former insurance industry executive, Jeff Summerhayes pointed out that with some [insurance] plans, “in excess of 50 per cent of the members in the plan will be impacted by these changes”.
“We are talking about many millions of insurance members’ cover dropping out as a result of these measures, which doesn’t mean that isn’t a sensible thing, but it does mean that you have to actuarially run experience models on how this new cohort of members will behave from a claims point of view and a pricing point of view so that you can appropriately have stability in that price,” he said.
“We think it may take some time until that experience settles down with that cohort having been taken out, from a premium point of view and also from a claims point of view, because this cohort was making claims and there were benefits being paid,” Summerhayes said. “So, there’ll be a settling period. We again think that means that a little more time to get that right will ultimately produce better outcomes for members, which is the whole intent of this measure.”
Summerhayes also pointed to the pressure which would be placed on the major superannuation fund administrators in altering systems to cope with the change, pointing out that there were now only two major players in the administration space.
