The Australian life insurance industry is to adopt common definitions as the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) conclude that it is almost impossible to make meaningful comparisons in the sector given the lack of common definitions among life insurers.
The announcement came as the two financial regulators released the initial industry-aggregate results from a joint pilot data collection project on life insurance claims. Comparison of data from 16 insurers was said to be "difficult" as data submitted did not entirely fit the regulators' set definitions. For example, there is difficulty in identifying what is or is not a “lapse” or what constitutes a reported, declined or withdrawn claim.
Other problematic terms and definitions are: notified claims; passive and active withdrawals; some claims and dispute outcome categories; claim and dispute amounts paid; and processing durations.
ASIC deputy chairman Peter Kell said: "There's a lot of work that needs to take place within the industry to ensure that they are categorising claims outcomes in a consistent way. Otherwise, you'll be comparing apples with oranges. Is everyone categorising claims denied, claims paid, claims withdrawn and disputes in a way that allows comparison?" he said.
APRA member Geoff Summerhayes said the joint project represents the first time that common definitions are being formalised across the industry.
“We are now focusing on the ability of insurers to report according to these common definitions, including how they can do their best to manage system constraints,” he said. “While significant progress has been made, there is still more work to be done to fully embed the definitions across the industry.”