Australian regulator warns of bad trends in superannuation

There has been decay in group life insurance claims in 2019 and 2020.

The Australian Prudential Regulation Authority (APRA) has urged life insurers and registrable superannuation entity (RSE) licensees to address concerning trends and practices in the provision of insurance to superannuation members.

The regulator has noted significant deterioration in group life insurance claims experience in 2019 and 2020, with the potential for the re-emergence of unpredictability and volatility in insurance premiums.

It is concerned that members are likely to be adversely affected by further substantial increases in insurance premiums and/or reductions in the value and quality of life insurance offered through superannuation.

APRA expects life insurers and superannuation funds to ensure that insurance offerings and benefits are sustainably designed and priced, provide appropriate value for members, and adequately reflect the underlying risks.

It has identified the need for superannuation trustees to maintain, and make available to insurers, high quality and sufficiently granular data to facilitate sustainable insurance design and pricing. There must be clear insurance strategies developed and maintained by trustees, and tender processes that provide adequate information and time to all participants, to allow them to consult on scheme design and appropriately price the risks and benefits.