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Regulation of insurers


Regulation of insurers

April 2, 2014 3:53 PM | Posted by Richard Batten, Tim Sutton, Thomas Ellicott | Print this page

One issue that could be considered as part of the Financial System Inquiry is whether there should be any change to the approach to regulating insurers. As it stands, different regulatory regimes apply to life, general and private health insurers. Private health insurers are also have their own regulator, the Private Health Insurance Administration Council, whereas general and life insurers are overseen by APRA. Given that both regulators perform similar roles, there is potential for APRA to assume universal oversight of the insurance sector.

Following the HIH collapse, the regulation of general insurers has moved closer to the model applied to life insurers, raising the potential for consolidation. There is overlap in some areas covered by life and general insurers, such as sickness and accident cover and disability cover. Further, some forms of insurance, such as consumer credit, will typically require two insurers to provide the cover simultaneously – a clearly inefficient outcome.

Differences do still exist, including the requirement for statutory funds for life companies, and different capital requirements. However, there is potential for the Inquiry to consider whether life and general insurers still require separate regulatory regimes or whether there could be merit in implementing a single licensing regime under APRA. APRA could authorise limit authorisations and apply different capital requirements to particular product classes. Consideration could also be given to removing the need for APRA regulated institutions to hold an Australian financial services licence for dealing in and advising on products relating to their APRA authorisation to remove another area of regulatory duplication.

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