The person incapacity revenue insurance coverage (DII) line might once more be in “jeopardy” amid indicators that suppliers are prioritising gross sales over product sustainability, Australian Prudential Regulation Authority (APRA) Deputy Chair Helen Rowell warns.
Ms Rowell says the prudential regulator is seeing some previous poor market practices – comparable to extra beneficiant product options – resurfacing, inserting the restoration of the person DII market in danger.
She says the prudential regulator will take motion if the pattern persists.
“APRA is dedicated to selling the sustainability of life insurance coverage merchandise, together with particular person DII, for the long-term advantage of policyholders,” Ms Rowell mentioned in a speech on the Danger Australia convention in Sydney.
“We is not going to shrink back from taking decisive and robust actions if required, together with potential will increase to supervisory capital changes once we see imprudent or reckless apply.”
APRA information launched final month exhibits the person DII market made greater than $1 billion in internet revenue for the 12 months to June 30, after dropping $343.5 million within the prior 12-month interval. The earnings restoration is a major enchancment as properly from the $723.2 million revenue posted within the 12 months to March.
The earnings rebound comes after APRA took motion a couple of years in the past to pressure the business to enhance particular person DII pricing and design in addition to danger governance.
“Issues began to look extra promising and, by the tip of 2021, a swathe of latest and extra sustainable particular person DII merchandise had hit the market,” Ms Rowell mentioned.
“Sadly, nevertheless, it seems the optimistic momentum might have been short-lived.”
She says the prudential regulator can also be seeing “worrying” indicators of comparable developments and practices in different courses of life insurance coverage, such because the group insurance coverage market.
“It will seem that danger features should not having the specified influence in lots of life insurers, leading to a scarcity of long-term administration of the end-to-end danger cycle of life insurance coverage merchandise,” Ms Rowell mentioned.
“And boards might not be taking a sufficiently holistic and long-term view when assessing dangers and outcomes.
“Nevertheless, our agency expectation is that boards will take the lead on driving actual and sustainable change on this market.
“It’s also essential that insurers take steps to affect different market individuals, comparable to advisers and ranking homes, to additionally focus extra on long-term product sustainability.