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We pay the top four in each regulatory sin bin a total of $6 million of year to whistle dixie!!! And around $500 million budget to play tiddlywinks with!!!
APRA puts life insurers on notice
The Australian 12:00am December 1, 2016
Michael Roddan
The prudential regulator APRA has told life insurers to upgrade their systems and clean up their problematic legacy books, which are full of dated and duplicated policies, while urging Canberra to pass laws making it easier for companies to stabilise the troublesome claims area.
The Australian Prudential Regulation Authority also put life insurance executive salaries in the firing line, warning it would review remuneration policies and outcomes for senior executives, risk and control staff and “material risk takers” at a number of institutions.
In his submission to the parliamentary inquiry, APRA member Geoff Summerhayes said the industry was burdened by complex legacy of long-term contracts and “outdated” systems which had the potential to hurt the entire financial system. “Operational complexity and poor consumer outcomes have the potential to lead to lack of confidence in the life insurance industry, can cause financial losses to institutions operating in the industry and can, in extreme cases, damage the stability of the financial system,” Mr Summerhayes said.
The parliamentary inquiry was set up following a series of scandals that have dented consumer faith in the sector, such as revelations of poor claims processes in Commonwealth Bank’s CommInsure arm, which was allegedly using outdated medical terms to deny claims.
Life insurance policies are long-term commitments and claims can last for decades, but a range of legal and tax issues mean old products are difficult to administer and update, leaving them prone to problems such as the use of outdated medical definitions.
Mr Summerhayes said ARPA continued to lobby for a “rationalisation mechanism” for legacy products, as proposed by the government’s recent Financial System Inquiry.
But without wanting to undermine the need for the legislation, Mr Summerhayes said the industry could still do more to clean up its legacy book on its own, and APRA would continue to pressure the sector to invest more in management systems.
“Life insurers need robust systems and processes capable of fairly and accurately administering their books of legacy business and have not always invested enough in these systems and processes,” he said. “While there has been progress in recent years, more needs to be done.”
Industry figures suggest about 25 per cent of all funds under management is in legacy products. APRA said data on legacy claims and policies was not readily available “in a reliable way to inform decision maker” which hindered the insurer.
The regulator also said it would also be monitoring rogue companies more closely.
