The Australian Prudential Regulation Authority (APRA) yesterday announced a package of proposed measures designed to improving governance and decision-making in the private health insurance sector.
As part of the package APRA is seeking to revise prudential standards for the segment such as extending a cross-industry prudential standard to the industry to ensure the competency and integrity of anyone exercising material influence over a private health insurer and introducing a standard for audit and related matters in recognition of the important role auditors can play in supporting prudential soundness.
APRA Executive Board Member Geoff Summerhayes said in a statement that the measures would bolster the industry’s resilience at a time when private health insurers faced significant challenges.
“As the affordability of private health insurance declines and younger, healthier policyholders leave the system, effective decision-making is vital to keep funds sustainable and able to pay their members’ claims into the future,” Mr Summerhayes said.
“These reforms will strengthen resilience by increasing the likelihood that boards, senior managers, auditors and actuaries will identify and take decisive action on emerging issues. We also expect policyholders to benefit through a reduction in the risk of failure arising from fraud, mismanagement, or other undesirable practices.”
The package commences Phase Two of APRA’s roadmap for comprehensively reviewing the prudential framework for private health insurance, launched in August 2016.
Phase One, which focuses on risk, will result in the adoption from 1 April this year of APRA’s cross-industry risk management prudential standard. Other aspects of Phase One, including operational risk and the role of the actuary, remain ongoing.
The third phase of the private health insurance roadmap, examining the industry’s capital standards, is likely to commence later this year.
APRA aims to finalise the standards later this year. The new measures are expected to come into force from 1 July 2019.