At the Association of Super Funds of Australia event, Deputy Chair Ross Jones acknowledged that APRA’s initial position that restricts benefits offered to coverage acquired through life insurance was stiff. When selecting an insurer, licensees were asked to check not only insurance level premiums but all insurance arrangements aspects prior to selecting an insurer. The adjustment now allows registered superannuation entities to get coverage through general and not only through life insurance providers.
The proposal was argued to be limiting and more expensive for superannuation members if funds have to be withdrawn from current contracts so coverage could be obtained from a life insurer. Jones quipped that the aim was for trustees to understand the risks involved with different insurers and to support the government’s proposed legislative restrictions on self insurance. He said the amendments could gain favorable results.
APRA will direct an insurance strategy that includes terms and conditions related to risks and probability of discontinued cover provided by a general insurer. Licensees must expect and be ready for it. Another risk is poor data quality which may move the industry for higher standards but SuperStream initiatives is seen to improve data quality. Still, gaps will have to be taken care of, said Jones.
Both industries under APRA must be careful on data quality from super funds so that no mispricing of risk, particularly in super funds growing larger would take place. Poor data quality risks and issues of non-receipt of benefits are fund impacts that could be avoided by an underwriting.