Life insurance (prudential standard) determination No. X 3 of 2007: Revocation of PS 6.4D Prudential Standard (Friendly Societies) PS 6.4D Service Contracts

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority

Life Insurance Act 1995, subsection 230A(5)

Under subsection 230A(5) of the Life Insurance Act 1995 (the Act), APRA has the power to revoke a prudential standard which has effect for the purposes of the Act.  Life insurance (prudential standard) determination No. X 3 of 2007: Revocation of Prudential standard PS 6.4D Service Contracts revokes Prudential Standard PS 6.4D Service Contacts (PS 6.4D).

PS 6.4D has effect, for the purposes of the Act, by application of regulation 33 of the Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999.  PS 6.4D only applied to friendly societies.

1.      Background

PS 6.4D will be superseded by LPS 231 Outsourcing (LPS 231) when LPS 231 comes into effect on 1 April 2007.  Accordingly, PS 6.4D can be revoked with effect from that date.

LPS 231 applies to all life insurance companies (including friendly societies) and was made by Life insurance (prudential standard) determination No. 3 of 2006 Prudential standard LPS 231 Outsourcing as varied by Life insurance (prudential standard) determination No. 4 of 2006 - Variation of Prudential Standard LPS 231 – Outsourcing.

2.      Consultation

APRA has undertaken public consultation on the proposal to revoke PS 6.4D.  This consultation occurred as part of the broader proposal to introduce Prudential Standard LPS 220 Risk Management (LPS 220), including the release of a discussion paper and discussions with industry representative.  Thirteen submissions were received from industry associations, life companies, professional services firms and other interested parties.  No respondent commented on this aspect of the proposals.