In the 2014/15 Budget, the Government announced that the majority of the Private Health Insurance Administration Council’s (PHIAC’s) functions in respect of the prudential regulation of private health insurers would transfer to the Australian Prudential Regulation Authority (APRA) on 1 July 2015. Legislation is required to give effect to the transfer of the relevant PHIAC functions to APRA.
On 31 March APRA released new draft standards for health insurers.
Prudential Standard HPS 510 sets out minimum foundations for good governance of a private health insurer. Its objective is to ensure that a private health insurer is managed soundly and prudently by a competent Board.
The key requirements of this Prudential Standard are that:
- specific requirements with respect to Board size and composition are met;
- the chairperson of the Board of directors must be an independent director;
- the Board must have a policy on Board renewal and procedures for assessing Board performance; and
- a Board Audit Committee must be established.
The standards replicate the rules set and administered by PHIAC, so no major changes are expected in the short term. However, with the bar on board evaluation and renewal subject to rising standards for listed companies we would expect more health insurers to seek external assistance on board effectiveness and renewal reviews over time.
The APRA paper on the transition arrangements can be found HERE.
The draft APRA HPS 510 standard can be found HERE.© Guerdon Associates 2023 Back to all articles