Documents

 

Australian Prudential Regulation Authority, Opening Statement, tabled at public hearing on Wednesday, 5 August 2020 (PDF90KB).

 

APRA

No. Member Question Hansard page
and Hearing date or
Written questions

Response

(Publication date)

APRA01QON Wilson

CHAIR: Sure, but my question wasn't whether that happens; my question was: is there anything to stop them offering a product where, for instance, two spouses want to open a joint account, therefore reducing its liabilities, insurance and fees, versus having individual accounts where the super fund can effectively raid their retirement savings to double up on fees, insurance et cetera.

Mrs Rowell: I would need to confirm this on notice, but my understanding is that, in a normal APRA regulated superannuation fund, it is one member, one account. There isn't the facility to have joint accounts.


CHAIR: Just to clarify, I understand that there may not be the facility, but is there anything to stop it being offered?

Mrs Rowell: I don't believe it's contemplated under the law. I would have to confirm that on notice.

Hansard, p. 17
5 August 2020
(26 August 2020)
(PDF52KB)
APRA02QON Kelly Mr KELLY: I understand that there was a position advertised earlier this year for Head of Climate Risk. Has that position been filled?

Mr Summerhayes: I understand we are down to a short list of candidates, so the position has not been finalised, but we'd expect that to be finalised in the coming weeks.

Mr KELLY: How many applicants did you have apply for that job?

Mr Summerhayes: I'm not sure of the exact number, but it was in excess of 100.

Mr  KELLY: A very popular position. And what was the salary that was on offer?

Mr Summerhayes: Can I take that on notice? That position is a couple of steps away from me in the organisation, and I haven't been involved in the interview process directly. Forgive me for not knowing the answer, but I'm happy to provide that on notice to you.
Hansard, p. 21
5 August 2020
(26 August 2020)
(PDF92KB)
APRA03QON Kelly Mr KELLY: Can you point me to where, in any of the APRA speeches or media releases over the last decade, you've talked about pandemic risk? I could probably point to 50 or more that talk about climate risk, but I'm struggling to see a single one where you talk about pandemic risk.

Mr Byres: You've given us a decade time horizon, and none of us at this table have been here for that entire decade. I'll take that on notice.

Mr KELLY: Okay. Let's say over the last four or five years then.

Mr Byres: I'd have to go back and look at when the last update was of the guidance on pandemics, but, whenever we did that, it would have obviously been public and it would have been consulted on. As I said, let me take that on notice and we will come back to you.
Hansard, p. 23
5 August 2020
(26 August 2020)
(PDF84KB)
APRA04QON Mulino Dr MULINO: I just had a couple of very quick questions on the heat map. Are you able to provide information on how many times the heat map has been accessed, and, if possible, a bit of a breakdown as to how many times by individuals and how times many by organisations?

Mrs Rowell: We'd have to take that on notice. I certainly don't have that information to hand, but I'm happy to look and see what information we could provide.
Hansard, p. 25
5 August 2020
(26 August 2020)
(PDF50KB)
APRA05QON Leigh Dr LEIGH: I will just return to a question we were discussing earlier about early superannuation access and the impact on superannuation investors who do not choose to withdraw their money. Industry Super Australia estimates that the cost for not-for-profit funds will be about $2.6 billion in investment returns. Has APRA carried out any modelling to come up with your estimate as to what the investment drag cost will be?

Mrs Rowell: No, we haven't.

Dr LEIGH:
What's your assessment of Industry Super's analysis?

Mrs Rowell: I haven't seen it, so I'm not in a position to comment.

Dr LEIGH: Do you think that this cost is likely to be trivial, or do you think it is likely to be in the billions?

Mrs Rowell: As I said earlier in my comments, I think there's clearly going to be a short-term cost. We haven't done the work to estimate what that short-term cost would be. I'm not sure of the basis of the estimate that's been done by ISA. I would be happy to take a question on notice to look at that.
Hansard, p. 28
5 August 2020
(26 August 2020)
(PDF49KB)
APRA06QON Wilson CHAIR: I will interrupt there and come towards a conclusion. I will quickly throw one final question, which is one I've asked of ASIC as well: have you done any audit or overview of the number of employees you have working in APRA who previously worked in superannuation?

Mr Byres: No, we haven't.

CHAIR: Consistent with the question that I asked ASIC, in response to which they agreed to do that, I ask you to do that based on who has worked in the super sector: industry super, retail super and, of course, both.

Mr Byres: Yes, we are happy to do so—noting, of course, that we recruit from the financial sector for pretty much the entirety of APRA.
Hansard, p. 28
5 August 2020
(26 August 2020)
(PDF108KB)
APRA07QW Falinski

In reference to the speech Mr Geoff Summerhayes gave on 4 February 2020 at the Members Health Directors Professional Development Day in Sydney:

(a) Mr Summerhayes claimed that only three health funds will be sustainable by 2022. Which three health funds was he referring to?

(b) Has the APRA modelling (including the data, assumptions, and key definitions such as ‘sustainable’ and ‘well capitalised’) used to support these claims been made available to all health insurers and their independent actuaries?

(i) If not, why?

(ii) What was the rationale behind setting an APRA 3 per cent cap modelled over two years?

(iii) Were other scenarios modelled or considered (e.g. modelling a 2 per cent cap or modelling over three or five years)?

(c) Was an advanced copy of Mr Summerhayes speech provided to the CEOs of ASX-listed insurers Medibank private and NIB? If so, why; and why was an advanced copy not provided to other insurers?

(d) Was Mr Summerhayes speech released to the media under embargo? If so, why?

(e) On 5 February 2020, there was an article in The Australian titled ‘Call for review as exodus leaves health funds exposed: Just three health insurers “viable”’:

(i) Does APRA believe that Mr Summerhayes speech and the resulting media coverage have damaged confidence in private health insurance?

(ii) Did APRA consider the risk that this speech could result in a run on health funds?

Written (13 October 2020)
(PDF69KB)
APRA08QW Falinski What is APRA’s view on forced consolidation of health funds?

(a) How many health funds does APRA believe will be in existence in 5 years’ time?

(b) What impact would the forced consolidation of health funds have on health funds that are headquartered in rural and regional Australia?

(c) Is APRA concerned that the loss of rural and regional based health funds will lead to the closure of small private hospitals located in the country?

(d) How will APRA ensure healthy competition remains in private health insurance for consumers?
Written (13 October 2020)
(PDF65KB)
APRA09QW Falinski In Mr Summerhayes’ speech he talked about axing community rating. Is APRA concerned that axing community rating would increase premium costs for some people? Written (13 October 2020)
(PDF58KB)
APRA10QW Falinski The health industry has advised that, following APRA taking over from PHIAC, the amount of costly red tape and regulation has skyrocketed and that this is pushing up premiums for consumers. What are you doing to reduce costly red tape and regulation? Written (13 October 2020)
(PDF64KB)
APRA11QW Leigh

In response to the Capability Review’s recommendation that APRA ‘create a competition champion within APRA’, APRA responded:

… APRA will review and enhance its decision-making processes to more actively champion the consideration of all elements of APRA’s mandate. APRA will strengthen its engagement and collaboration with the ACCC, as part of its strategic initiative in the 2018-2022 Corporate Plan.

Please provide an update on APRA’s progress in creating a competition champion in APRA, or equivalent work?

Written (13 October 2020)
(PDF65KB)
APRA12QON Wilson  CHAIR: … I want to raise some issues. We've asked a series of questions—many, many questions—of superannuation funds in the context of this crisis and some of the issues that it raises. To what extent has APRA looked at some of the revaluations, particularly of unlisted assets, in super funds over this period and whether they have integrity?

Mrs Rowell: We engaged closely with many of the funds across the industry from March until now, understanding how they were approaching responding to the crisis, including their approach to valuation adjustments and the like. That included engagement with [inaudible], engagements with investment committees and engagements with investment teams to understand the processes they went through, the nature and size of the adjustments that they made, both in the short term in response to the market movements and then, subsequently, as they moved through their normal end-of-year processes leading up to finalisation of 30 June accounts and unit prices. We got a reasonable degree of comfort through that process. We weren't necessarily looking at the individual asset adjustments or the valuation adjustments that were made. We were trying to understand the process that had been followed, the information sources and the people that were involved in that process to satisfy ourselves as to the robustness of the process.

CHAIR: I raise concerns because I take for instance that Cbus has 30 per cent of its assets in unlisted assets. If I go off an answer given by UniSuper, they've had up to a 45 per cent—at a particular time, I need to stress—writedown of one of their investments, which is quite considerable. If I go to one answer that came from Colonial First State, they're talking in the vicinity of about a 16 per cent reduction or writedown in their assets. Yet when I go to a question put to ISPT, Industry Super Property Trust, which of course has exposure to a lot of funds, in some cases they say reductions only amounted to 2.23 per cent. That seems like quite a big variation. Now, each asset is different and sits in a different class, but to say: 'Oh, we've only had a little bit of a knockdown of 2.23 per cent. Office retail is 10,' suggests to me that there are some pretty wild variations in either pre-COVID-19 valuations or during and post—what do we call it now?—COVID normal valuations. What work is being done to address whether there is going to be some integrity around that? I'll give those to the secretariat and they can provide them to APRA to review.

Mrs Rowell: At the moment we are actually doing a thematic review of evaluation practices and management of assets with a view—again, not necessarily looking at specific adjustments but to assess the range and quality of practices across the industry and where there is need for improvement. One particular area that we did identify in our engagement with industry through the COVID period was that there was room to improve some of those processes, and in particular the triggers and criteria used to determine when out-of-cycle valuation adjustments should be made, how they should be made and what the process was then for reverting back to a normal cycle of valuation adjustments. We're very happy to look at the information you provide on notice and incorporate consideration of that as part of that thematic review work. What we are intending to do in the early part of next year is come out with better practice guidance and a review of our prudential standard around investment governance, with a particular focus on lifting practice within this area.

CHAIR: I appreciate that. In fact, I encourage you to go and look at the answers to a lot of the answers that have been submitted as part of our inquiry into the four major banks and other financial institutions, because there's some quite interesting information but also, in addition to that, a lot of times funds are refusing to provide information. If they're not prepared to provide it to the parliament of the Commonwealth of Australia, perhaps they might be prepared, if you ask questions, to get that information.

I've raised with you previously concerns I have where there have been examples of super funds having auditors who cross-reference their own work. I raised an example explicitly with CareSuper, which has an internal audit firm of KPMG and then, when it comes to their proprietary limited company, their external audit team is also KPMG. I will provide that to the secretariat to provide to you as well.

Then I had a concern about what I have raised with you previously. You said that if I had examples I should bring them to your attention. This is a concern around quasi insider trading where, during the period at the start of the COVID-19 pandemic, there was of course a point where the ASX bottomed out. But there was obviously a lag until unlisted assets were revalued in light of the circumstances and the potential that money could be moved between different funds to effectively game and gain the benefits of the highs and lows in both sectors based on the delay between the two. I raised this with ASIC as well and I'm providing it to you.
All funds were asked the same question: what volume of switching between funds occurred in that time between the highest and lowest period by trustees of the fund that are also the member of the fund? To their credit, CareSuper, who I referenced before, said investment choices of individuals are treated with confidence—fair enough. However, CareSuper has in place a comprehensive conflict management policy and they have blackout periods which apply during that period to make sure that people didn't game the system. I can't say the same, for instance, with UniSuper's answer, where they said one member, who is also an executive of the fund, had one or more switch requests processed during this period to a total value of $445,368. There were 93 members at $13,644,974. NGS Super had something not dissimilar, where they had 15 staff members and three trustees who were moving money during that time within their fund. Cbus refused to provide information to us. We had in the case of AustralianSuper six trustees move money. One fund manager and 78 staff did during that time. And then we have Rest, where not only did they have trustees move $2.1 million; they had fund managers moving 465 and staff moving $10,234,000. In light of the fact that you've said you'll take an investigation if we provide this information, we've now provided it as well as other answers to other questions. I'm hoping, like ASIC, you will look into this matter.

Mrs Rowell: Very happy to look into it.

Mr Wilson has provided the following responses from superannuation funds for his question regarding unlisted assets:

CBUS40QW
CFS97QW
ISPT02QON

Mr Wilson has provided the following response from CareSuper for his question regarding internal and external auditors:

CARE03QW

Mr Wilson has provided the following responses from superannuation funds for his question regarding possible quasi insider trading:

CARE96QW
NGS96QW
CBUS98QW
AS103QW
REST111QW
Hansard, pp. 48 - 49
23 October 2020
(12 November 2020)
(PDF62KB)
APRA13QON Wilson CHAIR: … How many complaints did you get about superannuation in the past five years? If you don't have that, can you provide it to us on notice—or can you at least give us the last financial year? And have you faced any limitations in pursuing those complaints?

Mrs Rowell: I need to take the question about the number of complaints on notice. Generally speaking, we do try and look into complaints and see if we can resolve them. Sometimes we get anonymous complaints; they're very difficult to pursue. But on the whole we don't face any particular constraints in looking into complaints.

Hansard, p. 50
23 October 2020

(12 November 2020)
(PDF46KB)
APRA14QON Leigh  Dr LEIGH: You've recently published data on life insurance claims breaking it down, quite helpfully, by those who are individual advised, individual non-advised, group super and group ordinary. I'm struck on those figures by the massive differences across the sector. For example, among individuals who were advised, the claims payback rate is 81 per cent for TPD compared to 91 per cent for group super. In the case of accident, it's as low as 55 per cent among those who were advised. This doesn't paint a great picture for people who go to an adviser and buy life insurance, does it?

Mr Summerhayes: I'm not sure whether that's the right conclusion to draw. Adviser products are typically fully underwritten products, usually the largest sums of money and require medical underwriting in most instances. So that's why on those products you would see higher payout ratios than the products that are bought directly which you refer to, which in some cases are underwritten at the point of claim where you have to substantiate issues as opposed to being fully underwritten at the point of underwriting.

Dr LEIGH: But if I look at, say, your claims paid ratio and I go through group super, I get an 85 percent claims paid ratio; individual advised, 42 percent. It does suggest that getting your life insurance through superannuation is a way better deal than doing it through an adviser, doesn't it?

Mr Summerhayes: The number you're quoting—and I'm happy to look at it—I'm unfamiliar with and, intuitively, it doesn't sound right to me.

Dr LEIGH: I'm quoting numbers from your reports: the claims paid ratio by cover type and channel for the 12 months to June 2020. And in the case of TPD there's a similar difference: group super has a claims paid ratio of 95 per cent; individual advised policies have a claims paid ratio of 49 percent. So you're getting back almost a dollar in the dollar when buying TPD through group super, and you're getting back about 50c in the dollar buying it on the open market via a financial adviser. It does seem that this is a significant difference between the sectors.

Mr Summerhayes: Dr Leigh, I haven't got those figures in front of me. I don't doubt what you're saying. I'm very happy to take that on notice and give you a fuller explanation in writing.
Hansard, p. 53
23 October 2020
(12 November 2020)
(PDF69KB)
APRA15QW Wilson In light of the following donations (see table below), will APRA take appropriate action to stop superannuation funds and associated entities donating to political parties out of the retirement savings of Australians consistent with the sole purpose test? Written (1 December 2020)
(PDF54KB)
APRA16QW
Wilson
A constituent has contacted me in regards to the issuing of capital as shares by Australian listed companies and noted the below. What is APRA’s view on this statement?

“I have read recently that the ASX & APRA last week lifted the percentage of shares an Australian listed company can issue out as capital in a placement from 15% to 25%. These shares are bought at a discount by institutions who are favoured clients of the underwriting investment bank appointed by the issuing company. Retail shareholders and SMSF’s are excluded from this process. They may be able to participate in a share purchase placement at a later date, however even if they do their shareholding becomes diluted and low limits usually apply to these share purchase placements. If they are unable to participate in the placement because they don’t have the funds their position obviously becomes even worse. I understand in the UK the limit on these placements for companies is 5% of their share capital. I suggest the government closely scrutinize this and adopt the UK position. This certainly doesn’t pass the pub test particularly at a time when many small shareholders are struggling to stay afloat”.
Written
(11 December 2020)
(PDF46KB)

Committee Secretariat contact:

Committee Secretary
Standing Committee on Economics
PO Box 6021
Parliament House
Canberra ACT 2600

Phone: (02) 6277 4587
Fax: (02) 6277 4774
economics.reps@aph.gov.au

About this inquiry

The Standing Committee on Economics, which can inquire into and report on any annual reports referred to it by the House of Representatives, has agreed to undertake an inquiry into the Australian Prudential Regulation Authority's Annual Report 2019.



Past Public Hearings

23 Oct 2020: Canberra
05 Aug 2020:

more...

Inquiry Status

Current

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