APRA submission backs life insurers
There is anecdotal evidence which suggests that the current regulatory settings which prevent life insurers from helping injured workers get back to work sooner may be having unintended consequences, according to the Australian Prudential Regulation Authority (APRA).
The regulator has used a submission to the Parliamentary Joint Committee on Corporations and Financial Services to acknowledge that the legislative restrictions may be capable of change.
“APRA is aware of anecdotal evidence suggesting the current regulatory settings may have unintended consequences that are detrimental to policyholders in certain situations,” the submission said.
“There is growing evidence that early intervention should in principle be expected to improve outcomes for policyholders, as the likelihood of a person returning to work declines significantly the longer their absence from work, while their medical expenses increase.”
The APRA submission has come against the background of opposition to any legislative changes from key groups including the Australian Council of Trade Unions (ACTU) and plaintiff law firms.
The regulator said that any changes to the legislative settings were a matter for the Government but suggested that “subject to careful design” it would be unlikely to have adverse impacts from a prudential perspective.
“Conversely, it may have the potential to improve the sustainability of the life insurance industry over time by supporting the ability of insurers to assist claimants in returning to work,” APRA said.
It said that while life insurers had been profitable between 2009 and 2016, this had been primarily driven by Individual Life Lump Sum business, making low returns and material losses experienced by individual disability income insurance (DII).
The regulator suggested that encouraging life insurers to continue to develop their ability to provide early and targeted rehabilitation and medical benefits to improve return to work rates for DII policy-holders was one element that could be of assistance in helping address the insurers’ problems.
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