The Australian Prudential Regulation Authority (APRA) has provided insights from its annual life insurance CEO roundtable, held on July 17.
The event brought together key industry figures, including 21 CEOs from the life insurance sector, as well as representatives from Treasury, the Australian Securities and Investments Commission (ASIC), and the Council of Australian Life Insurers (CALI).
APRA’s roundtable served as a forum for discussing the challenges and opportunities associated with longevity risk management in Australia. The discussions were informed by the regulator’s bilateral engagements with industry stakeholders and its observations of longevity markets in other countries.
One of the central topics of discussion was the current demand for longevity products in Australia.
APRA noted that demand remains limited due to several factors, including low awareness among retirees and widespread misconceptions about these products.
The discussion highlighted the need for greater engagement between insurers and superannuation trustees to enhance retirees’ understanding of longevity risks and the benefits of longevity solutions.
“Although there is no ‘silver bullet’ to addressing the demand challenge, life insurers are an important stakeholder in the retirement ecosystem and can play a key role in leaning into the challenge,” APRA said.
It noted that international examples show higher uptake of longevity products where there is strong government support, either through incentives or compulsory schemes.
The roundtable also addressed the importance of product design and distribution strategies that align with retirees’ needs.
ASIC emphasised the findings from APRA’s recent “Pulse Check” on retirement income strategies, which underscored the importance of targeted member research during the product development phase.
There was significant discussion around the potential for “soft default” options that include longevity protection, which could help guide retirees in making informed decisions about their savings.
The participants recognised that while the concept of default options in the retirement phase presents challenges due to the varied needs of retirees, it remains a critical area for industry focus.
“ASIC emphasised that any retirement solution needs to be tailored to members’ personal circumstances, including how member needs evolve over time,” ASIC said.
Innovation within the life insurance sector was another key theme of the roundtable.
The participants expressed concerns that existing legislative and regulatory frameworks, particularly around the rationalisation of legacy products, are hindering the introduction of new offerings.
There was consensus on the need for a mechanism that would allow insurers to phase out outdated products in favour of more suitable options for retirees.
APRA acknowledged these concerns and noted that while innovation is essential, it must be pursued with careful consideration of retiree needs and be supported by a strong business case.
It also addressed concerns about its capital framework, which some participants viewed as more restrictive compared to international standards. However, it maintained that the primary focus should be on addressing the demand challenge to unlock the potential of the longevity market.
Looking ahead, APRA reiterated its commitment to continued collaboration with the life insurance industry.
It emphasised the importance of reducing barriers to innovation and improving the availability of longevity solutions, particularly as more Australians enter retirement with significant superannuation balances.
“APRA remains committed to continue engaging with the life insurance industry to explore ways to potentially reduce barriers for insurers to provide and innovate longevity solutions that improve retirement outcomes for the Australian community,” it said.
Australian life insurance companies will gather again soon, with the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) holding its annual Group Life Seminar on Sept. 3. Accessible in person and online, the seminar will see life insurance professionals discuss industry trends, challenges, and potential developments.
