Superannuation trustees will soon be able to access a document that provides all the information required to fully and better understand their fund's insurance business.
Speaking at the Conference of Major Superannuation Funds yesterday, Industry Funds Forum (IFF) project officer Francis Cox said a new insurance guidance note will be issued by the Financial Services Council (FSC) in the coming months.
He said the schema will accommodate and codify a range of definitions in use throughout the industry, rather than trying to force a standardisation of one definition.
It comes about after work between the IFF and FSC has been looked at trying to harmonise their data dictionaries to better meet the Australian Prudential Regulation Authority's (APRA) reporting standards.
Cox said the FSC's data dictionary was mainly practitioner facing and for use of its own stakeholders and members, allowing them a better way, in a standard form, to respond to APRA's data reporting requirements. The IFF approach had been a member facing dictionary.
"What it will give is a schema of all the data that needs to be provided, not just to satisfy SPS250, but also the spirit of which it was intended which was to be put in the hands of trustees and other industry players all of the information that they fully required to understand their insurance business on a day-to-day basis," Cox said.
He said the schema will also attempt to protect changes from the relationship between claims and premiums; provide better data to standardise tendering processes; encourage standardisation in common areas where it's not sensible to compete; help collect data on the impacts and rates of mental health in the insurance business; and provide a basis to align electronic insurance transactions so that the database can readily be maintained.
Also speaking at the session named "An industry plan for sustainable insurance" was CHR Consulting actuary Jeff Humphreys who said the insurance market suffered a profitability "crisis" during 2013 which saw a withdrawal of capital and reinsurers from the market - creating major issues for super trustees going for tender at the time.
"In a crisis we tend to panic and some trustees ended up with prices that are too high. Some trustees have reacted to that by reducing cover," Humphreys said.
He said Australia's group insurance market is not economically efficient because "we don't have many sellers and nowadays we don't have many buyers, although we used to. We don't think that's going to change."
He said insurers were now spending significant money to tender for just about every fund, in the hundreds of thousands of dollars. He said insurers were also very dependent on reinsurers and were now looking at structural change that included using three reinsurers instead of one.
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