APRA confirms life insurer/super fund profit share deals
Profit-sharing arrangements between group life insurers and superannuation trustees do occur, and more typically with larger superannuation funds, according to the Australian Prudential Regulation Authority (APRA).
APRA has confirmed the profit-sharing arrangements in response to questions posed by NSW Liberal Senator, Andrew Bragg, during Senate Estimates.
It said the most common ay APRA had observed the profit-sharing deals was through premium adjustment mechanisms (PAMs).
“PAMs are profit sharing arrangements that have a framework/policy on how favourable claims experience is applied, for example, to keep member premiums more stable,” APRA said.
In confirming the arrangements, APRA sough to explain that superannuation funds needed to avoid conflicts of interest and act in members’ best interests.
What is more, it said that it would not hesitate to act if it had concerns about the arrangements.
“Under Prudential Standard SPS 250 Insurance in Superannuation (SPS 250), trustees must ensure that the engagement of the insurer (including any profit sharing arrangement) is at arm’s length and in the best financial interests of beneficiaries, and they must consider how they would apply their conflicts management framework to any conflicts that may arise from an insurance arrangement. These matters must be considered on entering into an insurance arrangement and on a regular basis. In addition, SPS 250 requires insurance arrangements to include a right for an RSE licensee to terminate an insurance arrangement if it is considered to not be in the best financial interests of the beneficiaries,” APRA said.
“The Superannuation Industry (Supervision) Act 1993 (SIS Act) captures similar requirements including the requirement for trustees to act in the best financial interests of beneficiaries. The SIS Act also requires trustees to do everything that is reasonable to pursue an insurance claim for the benefit of a beneficiary, where there are reasonable prospects of success.”
“If APRA had concerns that trustees were not meeting regulatory requirements as a result of a profit sharing arrangement, APRA would not hesitate to probe entities in relation to the concerns and, if necessary, take any necessary action using the tools and powers available to us.”
You meant to say commissions……
Industry Super charge members Life Insurance Commissions that are Not Disclosed.
Industry Super then have a massive conflict of Interest to Not Process Insurance claims for members because then Industry Super earn Bigger Undisclosed Insurance Commissions.
And of course Regulatory Capture Corrupted APRA does NOTHING about these massive conflicts & Hidden Commissions of best buddies Industry Super.
APRA is a totally corrupted basket case.
You are finally having your day in the sun after years of writing (nearly every day) what you have written above.
Congrats.
oh, shock horror! APRA are pathetic, I mean the more these revelations roll out with no consequences or media outcry the more I realise how screwed this profession is.
Working over at Apra must be like recording in a sound studio – no noise gets out and anything said inside is muffled unless “on mike“. Apra was so disconnected from the life insurance industry and the impact of FASEA on advisers that they chose to introduce on 1 October 2021 an emaciated compulsory IP contract.
No one seemed to tell them, or they didn’t know, that the key part of their IP plan, which relied on advisers replacing legacy IP contracts with the new paper mache IP contracts, could cause advisers to breach Standard 3 and 5 and a few others.The big replacement program never worked.
So lets see : advisers have to avoid conflict, but Super fund trustees and insurers can manage conflict.
Anyway the news about insurers playing commissions to superfunds by any other name is not new. Most risk specialists have known about commissions and KPIs on claims for a few years
So does this mean that those funds have to have a big box on their PDS that says non-independent?
Yet another Canberra double standard joke. Sick of this.
No wonder insurance premium is revenue to APRA funds /ISA to boost returns calculation.
In an SMSF, it is a straight expense to reduce returns.
Back in the day when our firm used to write insurance, we were horrified when we started seeing more people coming in as members of a large union superfund (you know, the ones who advertise that cringeworthy somewhat ret@rded looking hand signals on the media), that their trustee had ‘negotiated new insurances’ which were more expensive with less/reduced benefits for members. after further digging with sources high up in the new insurer, we found out off the record that the trustees commission (no part of which flowed to the members) was substantially higher than the prior insurer. We wrote to ASIC and APRA and needless to say, absolutely nothing was done or acknowledged.
I’d suggest you contact Senator Andrew Bragg.
probably best you edit your comment and replace the R word with something more appropriate
Profit-sharing? It is commissions, and APRA are trying to gaslight Australians by not using this term. They really do not serve the people.