APRA urges collaboration for sustainable super life insurance

A survey was conducted to assess how the life insurance and superannuation industries are responding to the issue of sustainability.

The Australian Prudential Regulation Authority (APRA) has conducted a survey to assess how the life insurance and superannuation industries are responding to the issue of sustainability of group life insurance in superannuation. The survey was conducted at the end of 2022 and focused on three specific areas of concern: premium volatility, availability and provision of data, and tender practices.

APRA encourages collaboration between RSE licensees, life insurers, and reinsurers to improve access to data points that facilitate the design of benefits aligned with the insurance needs of different member cohorts at sustainable premium rates. 

Premium volatility is still evident, with recent legislative changes and uncertainties arising from the COVID-19 pandemic contributing to this volatility.

ALSO READ: APRA corrects audit standards for life insurers

Better practice examples include RSE licensees reviewing premiums to ensure stability, life insurers offering greater premium stability post the expiry of the rate guarantee period, and RSE licensees conducting detailed reviews of insurance offerings.

Minimal progress has been made in relation to the availability and provision of data. Challenges persist in obtaining member data from employers.

Better practice examples include collaboration between regulated entities, data cleansing by RSE licensees, and the use of a full data set by life insurers to assess the profile of the membership.

Improvement in tender practices was noted, with responses indicating that the time provided for insurers and reinsurers to engage in tenders was generally adequate.

Better practice examples include RSE licensees consulting with life insurers prior to commencing a tender and life insurers adhering to internal pricing hurdles when tendering.