APRA lambasts insurers’ poor past pricing practices
The Australian Prudential Regulation Authority (APRA) has accused some major insurance companies providing group life insurance of poor past pricing and governance practices and seeking to deliver premium rates that were not sustainable.
APRA member Ian Laughlin has used an address to an industry function to point to these practices as has having been key elements in the significant rises in group insurance premiums currently being implemented across the superannuation industry.
In doing so he provided data on declining profitability in the group life sector, saying that "as a result of the poor group claims experience, there have been some very significant increases in premium rates for large superannuation funds in recent times — of the order of 25 per cent to 40 per cent in a number of cases".
"This is a direct reflection of poor past pricing and governance practices, and recognition that the premium rates were just not sustainable," Laughlin said.
"It also gives a clear sign that better practices are now being followed by some insurers — with stronger governance, more robust experience analysis, justification of assumptions etc."
He said that while the insurance industry was "starting to address its shortcomings" in the management of group business, "unfortunately, superannuation members bear the brunt of the mispricing that occurred in the past".
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