Under siege: heavily criticised life insurance industry hit by $600 million profit fall
The Australian life insurance industry has received yet more bad news as data released yesterday by the Australian Prudential Regulation Authority revealed profits across the industry decreased by 18.5% for the year to March.
Figures released as part of APRA’s Quarterly Life Insurance Performance Statistics showed after tax net profits across the sector dropped from $3 billion in March 2016 to $2.4 billion in March this year, while expenses rose by almost 15% during the period.
The new figures come just a day after APRA Member Geoff Summerhayes criticised parts of the insurance sector for underinvestment in back-of-office operations which has left some insurers relying on systems which are decades out of date.
“While there are many positive examples, the less welcome legacies in some parts of the insurance sector are decades of neglected investment in systems, outdated products, poor business processes and ways of working that are not responsive to the challenges of our time,” said Summerhayes, in a speech at the Actuaries Summit in Melbourne on Monday.
Speaking as part of a talk on the fair treatment of customers and promoting ethical behaviour in organisations, Summerhayes also stated that, “the old structures and systems are no longer able to meet the needs of many of today’s consumers.”
“APRA is looking at this issue through the lens of operational risk and it is an area of increased supervisory focus.”
The life insurance industry has been stung by a number of criticisms in recent years, most of all by the Australian Securities and Investments Commission’s (ASIC) report in October 2016 which cited a number of “significant shortcomings” in the way some insurers handled consumer policy claims.
Among the findings of ASIC’s report were the use of outdated medical definitions by some insurers to deny claims, linking staff pay to claims outcomes and using in-house advisors to improperly favour their own policies.
The ASIC review made a number of recommendations to improve consumer outcomes, including a joint project by APRA and ASIC to make it simpler for life insurance customers to compare policies.
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