Unit pricing guide imminent as CBA errors cleaned-up
The Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) will jointly release an industry best practice guide on unit pricing within the next three weeks.
The guide is intended to prevent a repetition of incorrect pricing in unit-linked life insurance and managed funds products as happened this year to Commonwealth Bank-owned Colonial Mutual Life Assurance Society (CMLA), ING and Tower.
APRA deputy chairman Ross Jones told Money Management that the new guide, to be made available on the APRA and ASIC websites, was intended to “inform industry of what its unit-pricing obligations are”.
“Life insurance companies, fund managers and superannuation trustees need to have robust governance and control processes in place to ensure errors do not occur,” he said.
APRA announced last week it had made directions to CMLA over its pricing errors, requiring it to implement a plan to address deficiencies in its unit pricing processes.
CMLA has also been directed to obtain an independent external review of the implementation of the plan in 12 months.
In addition, CMLA is required to develop additional measures to ensure policyholders affected by its pricing errors are fairly compensated. This is despite CMLA already compensating a significant number of policyholders for unit pricing errors since March.
A media statement said APRA would “work with CMLA to ensure that the methods proposed to compensate policyholders under the directions are reasonable”.
APRA said when it approves the compensation methodology CMLA would contact affected policyholders with details of the compensation arrangements.
The directions, given under the Life Insurance Act 1995, follow the acceptance by ASIC in March of an enforceable undertaking from CMLA in response to the unit pricing errors.
As part of this enforceable undertaking, CMLA was required to appoint an external compliance consultant to review its unit pricing practices and processes.
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