Life insurers told to do more and spend more on legacy products
The Australian Prudential Regulation Authority (APRA) has told Australia's major life insurers they need not wait for Government legislation and can do and spend more to overcome legacy product issues.
The regulator has used a submission to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the life insurance industry to state that while legacy products represent a problem for insurers, there is more they can be doing of their own volition.
APRA acknowledged that legacy products become more complex and expensive to administer over time and are prone to problems such as the use of out-dated medical definitions and that there are a range of legal, consumer and tax issues that inhibit an insurer's ability to update legacy products.
However, the submission also noted that irrespective of the need for legislative action on the part of the Government, it believed "that the industry can do more in relation to legacy products".
"In particular, life insurers need robust systems and processes capable of fairly and accurately administering their books of legacy business and have not always invested enough in these systems and processes," the submission said.
"While there has been progress by industry in recent years, more needs to be done."
The regulator said it would continue to increase the pressure on insurers to invest more in the area, so that their systems and processes were more capable of meeting community and policyholder expectations.
Recommended for you
The Federal Court has dismissed a conflicted remuneration case brought by ASIC against the director of life insurance distributor Freedom Group, where Bali holidays and Vespa purchases were among sales incentives.
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
