Creating an insurance management framework will be a challenge for many super funds, CommInsure says.

“Funds are aware of the issues but it will be a challenge getting all the components of the insurance offering into one box,” Head of Industry Funds, Wholesale Life Frank Crapis told insuranceNEWS.com.au.

“But it is an opportunity to create a framework for managing the insurance offering in a fund.”

Super funds have only 10 months left to produce a framework to meet the Australian Prudential Regulation Authority’s (APRA) prudential standard SPS 250, Mr Crapis says.

“It is for the super fund board to appoint a committee to create the framework and then monitor the operation of the insurance program,” he said.

“The board must also review the framework and insurance strategy on a regular basis to make sure it is appropriate.”

Among items the committee must consider are management of claims, the underwriting process, premium recovery, service standards and how insurers are selected.

Mr Crapis says monitoring of the fund’s insurer will range from monthly for areas such as claims service standards to every 18 months for an overview of financial performance for the insurance contract.

The fund should conduct a review every three years with a full, financial analysis of how the contract is performing.

“If there were any material issues affecting the insured benefits, the committee should notify the [super fund] board as soon as possible,” he said.

“Any breaches would also have to be notified to APRA as soon as possible.”

Mr Crapis says the committees will need to undertake a benchmarking exercise on the insurance contract, either developed internally or using a consultant.

The committees must also watch for conflict-of-interest issues – but he says most already have these registers.

SPS 250 requires funds to keep insurance records for at least five years, including details of all claims and premiums.

“Some of the information will be held by the insurer and some by the fund administrator,” Mr Crapis said.

“In larger super funds, it will be better if the information is held for at least eight to 10 years.

“This will help the insurer price the fund’s insurance in the future.”

To help committees produce the framework, CommInsure has developed a template covering all issues to be included.

Mr Crapis says the company can also help when a fund is comparing the performance of the existing insurer.

“We have software that will compare more than just premiums,” he said.

“It looks at items such a demographics, as we are prepared to help funds conduct their reviews to meet the new standards.”