The Australian Prudential Regulation Authority (APRA) is seeking feedback on a set of proposed measures designed to improve governance and decision-making in the private health insurance sector.
The consultation package, titled Governance, fit and proper, audit and disclosure requirements for private health insurers, is open for submissions until May 2, with the prudential regulator aiming to finalise the standards later this year and enforce them from July 1, 2019.
APRA seeks to introduce to the industry stronger prudential standards that have successfully improved capabilities across other APRA-regulated industries. Proposed measures include:
replacing prudential standard HPS 510 Governance with CPS 510, to strengthen governance practices;
enforcing CPS 520 Fit and Proper, to ensure the competency and integrity of anyone exercising material influence over a private health insurer;
implementing HPS 310 Audit and Related Matters in recognition of the important role of auditors in supporting prudential soundness; and
scrapping HPS 350 Disclosure to APRA to streamline reporting and remove obsolete requirements.
Geoff Summerhayes, APRA executive board member, said the changes would strengthen the industry's resilience against the significant challenges faced by private health insurers.
“As the affordability of private health insurance declines and younger, healthier policyholders leave the system, effective decision-making is vital to keep funds sustainable and able to pay their members’ claims into the future,” Summerhayes said. “These reforms will strengthen resilience by increasing the likelihood that boards, senior managers, auditors, and actuaries will identify and take decisive action on emerging issues. We also expect policyholders to benefit through a reduction in the risk of failure arising from fraud, mismanagement, or other undesirable practices.”
The consultation package marks the start of phase two of APRA's roadmap for comprehensively reviewing the prudential framework for private health insurance, launched last August.
Phase one, which focuses on risk, led to the adoption of CPS 220, APRA’s cross-industry risk management prudential standard, in April. Other aspects of phase two, including operational risk and the role of the actuary, remain ongoing, APRA said.
The third phase of the private health insurance road map, which will look into the industry's capital standards, will commence later this year.
Access APRA's consultation package here.
