A warning to insurers that the regulators will monitor their progress in meeting expectations of their life insurance pricing decisions drew much reader interest this week\u2026<\/h3>\n<\/div>\n<\/div>\n
Life companies have been warned that over the next 12 months APRA and ASIC will monitor their progress in meeting regulatory, consumer and community expectations of pricing decisions.<\/p>\n
The regulators will also monitor marketing and disclosure, as well as product design “…to deliver better consumer outcomes.”<\/p>\n
A detailed letter<\/a> to all\u00a0 life insurers outlines the findings from the regulators’ joint review of life companies\u2019 practices in relation to premium increases, including subsequent corrective action taken by some life companies. It also makes clear ASIC and APRA\u2019s regulatory expectations of life companies going forward.<\/p>\n …we will consider appropriate regulatory action if our expectations are not met…<\/p><\/blockquote>\n It states that \u201c\u2026 we will consider appropriate regulatory action if our expectations are not met.\u201d<\/p>\n The regulators’ expectations are that life companies:<\/p>\n APRA and ASIC also say that as next steps, life companies should \u201c\u2026examine their contracts to ensure that the terms about how and when premiums may change are transparent and not unfair.\u201d<\/p>\n …Life companies should ensure their disclosure and marketing materials … are fit for purpose and help consumers to properly understand how their premiums may change…<\/p><\/blockquote>\n They say when making re-rate decisions \u201c\u2026due consideration should be given to the consumer impact as part of the risk management framework. Life companies should ensure their disclosure and marketing materials and any other relevant communications are fit for purpose and help consumers to properly understand how their premiums may change.\u201d<\/p>\n The two bodies say that to do this effectively \u201c\u2026life companies themselves need to better understand the rate and drivers of future premium increases.\u201d<\/p>\n \u201cMore rigorous product governance practices, which will be aided by deeper engagement with the design and distribution obligations, will help life companies to better meet consumer needs and deliver responsible market practices.\u201d<\/p>\n Addressing Concerns Raised in 2022<\/strong><\/p>\n The letter also notes that life companies have started taking action to address concerns raised by APRA and ASIC in an earlier letter dated 8 December 2022:<\/p>\n But, they say, more needs to be done by life companies.<\/p>\n Frequent Re-ratings<\/strong><\/p>\n Amongst the observations regarding premium increases APRA and ASIC say life companies conduct an annual experience investigation and then decide whether premiums are set at the right level to cover estimated future claims costs.<\/p>\n \u201cThis frequently leads to increases in base premium rates that are charged to consumers. This process is known as re-rating premiums.\u201d<\/p>\n The letter points to frequent re-ratings. \u201cOf the 16 life companies that have provided retail life policies, 13 have re-rated at least once and seven have re-rated at least four times since 2017.<\/p>\n The observations on premium increases in the letter also note:<\/p>\n\n
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