The life insurance companies which increased their group life insurance premiums in the face of highly adverse financial results have not necessarily addressed the underlying problems, according to the Australian Prudential Regulation Authority (APRA).
Discussing the challenges which have confronted insurers in the group insurance space in recent years, particularly those around total and permanent disability and trauma, APRA said it had observed that many insurers chose to increase premiums to improve profitability.
However, it told the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the life insurance industry that while some premium increase was needed to return pricing to a sustainable level following a period in which premiums were insufficient to reflect risk this did not represent a total answer.
“In APRA’s view, these increases did not by themselves address the underlying problems and have produced an unexpected increase in the cost of insurance for superannuation fund members,” it said.
The APRA submission said the regulator was continuing to discuss how the market could be strengthened with insurers and reinsurers active in group risk insurance, as well as with trustees.
“Areas with scope for further strengthening include the review of complex and old definitions, and enhanced dialogue between trustees and insurers to improve benefit design in light of the trustee’s obligations to not inappropriately erode retirement balances of superannuation members,” it said.
