APRA and ASIC publish key industry data on life insurance claims

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The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have today released initial industry-aggregate results from a pilot data collection on life insurance claims.

The new data collection is being developed by APRA and ASIC to improve public reporting of life insurance claims performance across the industry. The two agencies plan to release further statistics in future phases of the project, including entity-level data, once the data is sufficiently credible, reliable and comparable.

APRA and ASIC have also today released the Information Paper Update on steps to implement a public reporting regime for life insurance claims information. The paper provides feedback on common data quality issues observed to date to support improvements for subsequent collections, and outlines the next steps in the project.

The industry-aggregate data released today, and set out in the below table, shows that insurers finalised 103,100 claims during 2016, of which about 92 per cent were admitted and about 8 per cent were declined.  It is important to note that the decline and withdrawn rates in the table below are not expected to be zero, as a portion of claims fall outside the policy terms and insurers can and do legitimately decline such claims. Some policyholders will also withdraw their claim when it becomes apparent that it is outside the terms of the policy.

APRA Member Geoff Summerhayes said: ‘Significant progress has been made to date on this initiative to develop a consistent public reporting regime for claims data and claims outcomes, which will improve transparency and accountability in the life insurance industry.’

ASIC Deputy Chair Peter Kell said: ‘Importantly, the analysis of this initial data reinforces the findings of ASIC’s Report 498 that over 90 per cent of life insurance claims are paid in the first instance by insurers’.¹

The information paper released today also announces the second round of the pilot collection, outlining the refinements to the data template and definitions for insurers that will shortly be released.

At present, meaningful comparisons are difficult to make because insurers have a wide range of differing systems, products and processes.  These differences have led to a variety of data definitions, making data interpretation difficult. For example, where two insurers have different definitions for what constitutes a reported, declined or withdrawn claim, the data they reported on these items is not comparable between them.

This joint APRA and ASIC 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. While significant progress has been made, there is still more work to be done to fully embed the definitions across the industry,’ Mr Summerhayes said.

In May 2017, APRA released the Discussion Paper Towards a transparent public reporting regime for life insurance claims information, and a number of submissions were received with some indicating support for exploring an industry-led approach to data collection and publication, as well as the collection of data on a claim by claim and dispute by dispute basis. APRA and ASIC will continue to assess the feasibility of such approaches through engagement with stakeholders.

Copies of the information paper are available on APRA’s website.

¹ Australian Securities and Investments Commission: Report 498 Life insurance claims: An industry review.

Table 

Notes

* Reported claims include claims reported during calendar year 2016, as well previously reported claims that were undetermined at the start of calendar year 2016.

** Finalised claims are those where a claims decision was reached during calendar year 2016.

*** Comprised of claims related disputes lodged during calendar year 2016, as well as claims related disputes that were undetermined at the start of calendar year 2016.  This includes a degree of double counting because multiple disputes can relate to the same underlying complaint and disputes may have been recorded under multiple dispute types by some insurers: internal (lodged with and reported by insurers), external (lodged with external dispute resolution schemes and reported by insurers) and litigated disputes (lodged in court and reported by insurers).  This does not include disputes lodged only with superannuation fund trustees and not referred to insurers.

**** Given a possible time lag between claims decisions and related disputes, disputes lodged during calendar year 2016 could also relate to claims reported and finalised before calendar year 2016.