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Ahead of sweeping government reforms related to life insurance in super funds, group insurers have been warned not to take advantage of the changes by jacking up premiums.
The federal government is set to remove default life cover for super fund members under 25, those with balances under $6,000, and inactive members, as part of a reform package designed to pump $700 million back into the Treasury’s coffers over the next four years.
“Insurers and trustees need to make sure any prices increases that may flow from those changes, if there are such things, are done on a sensible and commercial basis and not used as an opportunity to reprice for more profits,” said Adrian Rees, APRA general manager, in an AFR report. “I know everyone is busy and finding things difficult and stressful... I guess it’s a matter of putting your nose to the grindstone and getting on with it.”
A number of industry representatives conceded there is a risk of sharp premium increases during the repricing process.
“We started off talking about 2012/13 and pricing overshooting the mark - and if we don’t have the appropriate timeline to think through all the machinations and the variables at play here we could see that overshooting again,” said James Carey, Metlife’s head of group insurance.
The Senate Economics committee heard last week that the move would bring a double-digit spike in premiums, with a KPMG report forecasting up to a 26% increase.
A number of life insurance executives on the panel reiterated concerns about the unintended consequences of the measures, as well as the timeline for the implementation.
“I frankly think to stick to July 01, 2019 is reckless,” TAL’s Brett Clark said. “We’ve talked a little on price but, in some instances, they may not be even be able to get cover at all.”
MetLife’s Carey said group insurance businesses were making great efforts to come up with the
required resources for the changes.
“There is no doubt that we are stretched, equally what it is also highlighted is a shortage of talent in various elements in our industry as we are scrambling around trying to resource the implementation,” he said.
Stephanie Philips, AIA chief group insurance officer, agreed that the implementation’s accelerated timeline will have a major impact. She also raised questions about who was going to pay for the $80 million to $100 million in life claims lodged by the under 25 cohort each year, AFR reported.
