The Australian Prudential Regulation Authority (APRA) has weighed into the controversy around life insurance claims handling and CommInsure, with its chairman, Wayne Byres, telling a Senate Committee that the regulator is closely examining corporate culture in the sector.
Without directly naming any particular company in the sector, Byres told the Senate Economics Committee that culture represented a part of APRA’s prudential mandate and helped protect against poor outcomes.
“Our work is primarily directed to detecting the potential for the financial institutions we supervise to be badly mismanaged, such that they put their own viability at risk,” he said. “Although we’re not the lead regulator when it comes to instances of consumers being unfairly treated, we are very interested in what those episodes tell us about the culture within financial institutions, and the extent to which incentives might be operating to encourage imprudent behaviour.”
Byres noted that a little over 12 months ago, APRA had instituted a new standard that, amongst other things, introduced an explicit requirement on Boards to form a view about the risk culture of their institutions, assess whether it was consistent with their strategy and risk appetite, and — if they felt change was needed — ensure something was done about it.
“While we would observe that Boards are giving more attention to issues of culture, I think it also fair to say that they are still grappling with how best to do this in a robust and systematic manner,” he said.
