The life insurance industry is to get common definitions following work by the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) concluded that it was almost impossible to make meaningful comparisons under current arrangements.
The announcement came as the two financial services regulators released the initial industry-aggregate results from a pilot data collection project on life insurance claims which confirmed that more than 90 per cent of life insurance claims are paid in the first instance.
However, it is the decision on definitions which will have most meaning for the industry, particularly in circumstances where one of the most strident criticisms of the development of the Life Insurance Framework (LIF) was the difficulty in identifying what was or was not a “lapse”
The ASIC and APRA analysis released this week said that, at present, meaningful comparisons were difficult to make because insurers had a wide range of differing systems, products and processes.
“These differences have led to a variety of data definitions, making data interpretation difficult. For example, where two insurers have different definitions for what constitutes a reported, declined or withdrawn claim, the data they reported on these items is not comparable between them,” it said.
Commenting on the findings, APRA member and former insurance industry executive, Geoff Summerhayes said the joint APRA and ASIC project represents the first time that common definitions are being formalised across the industry.
‘We are now focusing on the ability of insurers to report according to these common definitions, including how they can do their best to manage system constraints,” he said.
“While significant progress has been made, there is still more work to be done to fully embed the definitions across the industry,’ Summerhayes said.