The Australian Prudential Regulation Authority (APRA), the insurance, banking, and superannuation fund regulator, has said that the government's start date for changes to default insurance arrangements in superannuation schemes are "unachievable", backing calls for an additional year.
Appearing before the Senate Economics Legislation Committee last week, APRA deputy chair Helen Rowell said the current start date for changes to insurance in default super will have “unintended consequences”, according to Investor Daily.
The government announced in the 2018 federal budget in May that it would remove default life insurance for super members under 25, as well as put a 3% cap on fees for low account balances (below A$6,000 [$4,430]).
Mrs Rowell suggested that the fee cap was achievable by the government’s deadline of 1 July 2019, but she had grave doubts about the possibility of the insurance arrangements being changed by that time.
“To implement all of these proposals, funds will need to work closely with their administrators and insurers to ensure the required system changes and amendments to group insurance arrangements are in place,” Mrs Rowell said.
“Insurance arrangements will need to be reviewed and repriced (taking into account actuarial input), underwriting processes reviewed and contractual arrangements renegotiated accordingly,” she said.
“These processes can be highly complex and time consuming for individual superannuation funds, and will be even more so when the industry as a whole is impacted.”
Super funds will also have to communicate the changes with their millions of members, she added.
APRA member Geoff Summerhayes noted that the super industry consists of 140 super funds, 22 insurers, 7 reinsurers and a number of administrators— all of whom would have to renegotiate contracts with one another.
“APRA hasn’t put a timeframe forward but an additional year seems like a sensible idea, particularly when it comes to insurance,” he said.