The industry funds have admitted to a Parliamentary Committee that they receive rebates under “risk sharing” arrangements with insurers but intend that those arrangements will become more transparent in future with the rebates being separately accounted.
The Australian Institute of Superannuation Trustees (AIST) executive manager, policy and research, David Haynes has used an answer to a question on notice from the Parliamentary Joint Committee of Inquiry into the Life Insurance industry to confirm the relatively widespread use of the arrangements.
“While I do not know all the details in relation to all AIST member superannuation funds, I am aware that some of our super fund members have risk sharing arrangements in place with their insurers,” Hayne’s answer said. “Each of these arrangements have been individually negotiated between the super fund and their insurer, and so vary from case to case.”
“These arrangements may involve payments to or from their insurer depending on their claims experience. For example, insurance premiums for an annual period may be adjusted after the end of that year once the claims experience is known, to reflect that claims experience. This is known as the Premium Adjustment Model,” his answer said.
However Haynes said AIST had been discussing this issue with its members, and would be suggesting to the Insurance in Superannuation Working Group (ISWG) “that the industry as a whole consider the following elements as part of good practice and standardised disclosure around risk sharing:
- Ongoing support for risk sharing arrangements;
- Rebates to the fund to be separately accounted for, and held in a dedicated insurance reserve;
- These arrangements to be transparent and publicly disclosed, and include details of the amount/s paid, by whom and to whom; and
- Disclosure to be in super fund’s financial statements and annual report.