Group life insurance requirements to be tightened
Group insurance arrangements for life insurance may be tightened after the Australian Prudential Regulation Authority (APRA) released draft guidelines aimed at limiting premium increases and requiring more information from those insured.
APRA released the draft guidelines late last year in 'LPG270 - Group Insurance Arrangements' aimed at life insurance providers and the superannuation funds that use life, total and permanent disability (TPD), and income protection cover provided by insurers.
APRA was concerned about the trend among insurers to outsource claims decisions to the administrators of the superannuation funds, according to a statement released by Deloitte, and preferred claims management remained with the insurers who had the appropriate expertise.
Deloitte also stated that APRA supported the creation of profit-sharing arrangements between superannuation funds and insurers so that the superannuation fund and insurer shared the insurance risk - rather than group rebates being a source of profit for the fund.
Deloitte Superannuation leader Russell Mason said that group premiums for superannuation funds have increased ranging from 30 per cent to more than 150 per cent, and that to stop insurers leaving the market it was necessary to develop new approaches to group insurance arrangements.
Mason stated there would need to be a focus on better risk assessment, underwriting practices, contractual terms and data analysis.
He stated that APRA had expressed these concerns in LPG270 by stating that group tenders would require insurers to collect more information than is currently provided, particularly with regards to claims experience.
APRA was also concerned about high automatic acceptance limits on offer in group life funds, particularly those that allowed members to take out high levels of cover without providing any medical evidence.
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