The Australian Prudential Regulation Authority (APRA) has released a new package of prudential standards and guides it says are aimed at improving governance and decision-making in the private health insurance industry.
The regulator said that, after a period of consultation, it had finalised three new prudential standards and two guides designed to assist insurers to fulfil the requirements of the standards.
The measures, outlined in a package released earlier this year, introduce stronger prudential standards that have successfully lifted capabilities across other APRA-regulated industries.
The new prudential standards for PHI are:
- Prudential Standard CPS 510 Governance (CPS 510), a stronger cross-industry standard on board governance and renewal, which replaces the equivalent PHI-specific standard, HPS 510 Governance;
- Prudential Standard CPS 520 Fit and Proper (CPS 520), which requires boards to establish and apply a written policy to ensure the competence and integrity of anyone exercising material influence over the company; and
- Prudential Standard HPS 310 Audit and Related Matters (HPS 310), requiring PHIs to appoint an auditor to provide independent advice on their operations, financial position and risk controls.
APRA has also released two Prudential Practice Guides, CPG 510 and CPG 520, to help private health insurers meet the requirements of the new standards. It has also confirmed it will revoke Prudential Standard HPS 350 Disclosure to APRA.
APRA executive board member Geoff Summerhayes said the new measures would bolster insurers’ resilience as the industry confronted mounting sustainability challenges.
“As affordability declines and the proportion of Australians covered by private health insurance falls, especially among the young, it’s vital that boards and management can swiftly identify emerging issues and respond decisively.
“These new measures are designed to encourage timely and effective decision-making, helping insurers remain sustainable, and minimising the risk of failures that could threaten policyholders’ cover,” said Mr Summerhayes.
The revised prudential standards will come into effect from 1 July 2019.