Colonial First State (CFS) continued to use CommInsure as its group insurer even though it was not ranked amongst the best providers in terms of premium costs, the Royal Commission has been told.
However, CFS executive general manager, Linda Elkins signalled that the status of CommInsure as provider of group insurance to the funds was now under review.
Counsel assisting the Royal Commission, Michael Hodge QC pointed Elkins to work undertaken by actuarial consultancy Rice Warner and said it suggested that it showed that CommInsure often ranked worse that the median and that where it did better than the median, it only did a little better.
Asked whether the Commission could draw any conclusions about the adequacy of the supposedly arm’s length negotiations between CFS and CommInsure, Elkins said this was not necessarily the case.
“I think the role of the product manager is to do the benchmarking, do the annual reviews. That’s overseen by the office of the trustee as well. Then to come to a conclusion as to whether we’re better off – again, this is a position of incumbency,” Elkins said.
“The question becomes are we better off to negotiate with the incumbent insurer where we see these weaknesses or are we better off to change insurer. And on balance the decision that has been made is to negotiate with the incumbent insurer, but this benchmarking would inform that negotiation.”
Asked by Hodge whether there had ever been any serious discussion at board level about the possibility that Colonial would cease to use CommInsure, Elkins said that there had been.
She said that, more recently, the sale of CommInsure to AIA had been informing the board’s views.