Montoux and Deloitte hosted the latest Shifting Gears Breakfast Seminar in Sydney, Australia, last Friday on March 6th. This session was all about APRA, particularly its recent interventions on disability income (DI) insurance and the impact these changes have on product and pricing teams in life insurance.
Open exclusively to life insurance professionals, the event welcomed two speakers from different sides of the discussion. Ilanko Sellathurai, insurance division senior manager at APRA, gave a presentation entitled, Individual Disability Income Insurance – State of Play. Covering APRA’s major concerns with DI insurance today, Sellathurai discussed how now is the time for insurers to move quickly to address changes across governance, pricing and product design, data, and resourcing.
He also explained that APRA is looking for proactive leadership from Australian insurers today, saying the industry needed to learn from the DI Intervention and make changes to the rest of their portfolio as needed.
The second presentation, entitled Individual Disability Income Insurance – a perspective on where we are at, was given by Brad Louis, Chief Commercial Officer at Munich Re. His perspective on APRA’s recent intervention was the insurance industry needed a kick, but it’s not enough without insurers prioritizing these changes in an urgent and meaningful way.
He also touched on seven principles of insurability:
- The incidence of a claim and resulting loss must be measurable and definable.
- The claimant should not have a financial incentive to claim or remain on claim.
- The incidence and amount of the potential loss should be random and not unduly subject to influence by the insured, medical or legal interpretations or economic conditions.
- The risk should be measurable using statistics, and ideally past experience of the actual risk being undertaken. If it is a new risk than appropriate risk mitigation is available.
- It must be possible to charge a high enough premium to cover all claims and associate expenses.
- The premium should be commensurate with the risk.
- The insurer must be able to effectively manage the portfolio of risk over time.
Louis then went on to address the impact of APRA’s intervention on the insurance market, stating that, while these changes were a good start, there was more that insurers could take upon themselves to address beyond what APRA specifically outlined. He concluded by emphasizing the importance of prioritizing sustainable products over market share, saying that if insurers want industry change, they need to be prepared to lead the charge.
After these two fantastic presentations, we opened up a panel discussion to include additional perspectives. Key takeaways from this were that it’s important for insurers to do more than simply the bare minimum to address APRA’s concerns. This intervention should be taken as an opportunity to improve business functions and products in order to better serve Australians and become more customer centric.
At Montoux, we’ve been tracking the impact of APRA’s intervention on life insurers very closely. If you’d like to learn more, here are a few helpful videos to get you started. Any additional comments or questions concerning APRA? Please feel free to reach out to us for more information.