Private Health Insurance (Insurer Obligations) Rules 2007
The Private Health Insurance Administration Council makes these Rules under item 2 of the table in section 333-25 of the Private Health Insurance Act 2007.
Dated 30 March 2007
[signed]
____________________________________
Garry Albert Richardson
Commissioner
Private Health Insurance Administration Council
Contents
Part 1 Preliminary 5
1. Name of Rules 5
2. Commencement 5
3. Definitions 5
Part 2 Prudential standards 8
4. Establishment of prudential standard 8
5. Insurers to notify appointed actuaries of certain circumstances 8
6. Insurers to prepare financial condition report 11
Part 3 Appointed actuaries 12
7. Eligibility for appointment 12
8. Declaration by the Council 13
9. Notification of appointment etc 15
10. Cessation of appointment 17
Part 4 Duties and powers of appointed actuaries 19
11. Duties 19
12. Application of skill and diligence 21
13. Notifiable circumstances 21
14. Financial condition report 23
Part 5 Reporting and notification requirements 24
15. Copies of reports to Council 24
16. Information to be given to the Council annually 24
17. Certification requirements 26
Part 1 Preliminary
1. Name of Rules
These Rules are the Private Health Insurance (Insurer Obligations) Rules 2007.
2. Commencement
These Rules commence:
(a) if the Rules are registered before the Act commences―at the same time as the Act commences; or
(b) if the Rules are registered on or after the day on which the Act commences―on the date on which the Rules are registered,
whichever occurs first.
3. Definitions
Note: Terms used in these Rules have the same meaning as in the Act―see section 13 of the Legislative Instruments Act 2003. These terms include:
appointed actuary
capital adequacy standard
chief executive officer
Council
director
health benefits fund
policy holder
private health insurer
product
In these Rules:
Act means the Private Health Insurance Act 2007.
board means the board of directors of the private health insurer or, if the insurer is not a company within the meaning of the Corporations Act 2001, the governing body of the insurer.
financial condition report means a report on the financial condition of the private health insurer, including a report on the financial condition of each health benefits fund conducted by the insurer.
new product means a product that has not been previously offered by a private health insurer that contains characteristics that are different from other products offered by that insurer.
notifiable circumstance has the meaning given by subrule 5 (3).
related person in relation to an appointed actuary means:
(a) the actuary's spouse; or
(b) a dependent child of the actuary; or
(c) a business partner of the actuary; or
(d) an employer (other than the appointing private health insurer) of the actuary; or
(e) a company of which the actuary is a director.
Part 2 Prudential standards
4. Establishment of prudential standard
For section 163-1 of the Act, this Part establishes a prudential standard relating to prudential matters for private health insurers.
5. Insurers to notify appointed actuaries of certain circumstances
(1) A private health insurer must:
(a) notify its appointed actuary about any notifiable circumstance; and
(b) provide to the actuary all relevant information and documents about the circumstance that the actuary requires to perform the duties and exercise the powers of the actuary imposed by or under the Act.
(2) The private health insurer must notify the appointed actuary and provide the relevant information and documents as soon as practicable after becoming aware of the notifiable circumstance.
(3) A notifiable circumstance is each of the following:
(a) proposed changes to the rates of premiums charged under a product of a health benefits fund conducted by the private health insurer;
(b) proposed changes to the benefits provided under a product of a health benefits fund conducted by the insurer;
(c) significant redevelopment or revision of the strategic or business plans of the insurer;
(d) significant redevelopment or revision of the strategic or business plans of a health benefits fund conducted by the insurer;
(e) development of a new product of a health benefits fund conducted by the insurer;
(f) major revision of an existing product of a health benefits fund conducted by the insurer;
(g) significant changes to the investment policies of the insurer;
(h) significant redetermination of the risk profile of the insurer;
(i) development of, or changes to, a capital management plan, being a plan dealing with the management of capital of the insurer or a health benefits fund conducted by the insurer;
(j) any other event that the insurer reasonably expects to have a significant impact on the conduct of the business of a health benefits fund of the insurer;
(k) significant business diversification activity;
(l) any event specified in writing to the insurer from the actuary.
6. Insurers to prepare financial condition report
A private health insurer must, as soon as practicable after the end of each financial year:
(a) request its appointed actuary to prepare a financial condition report; and
(b) provide a copy of the report to the Council within 3 months after the end of the financial year.
Part 3 Appointed actuaries
7. Eligibility for appointment
(1) For the purposes of subsection 160-5 (1) of the Act, a person is eligible for appointment as a private health insurer's appointed actuary if:
(a) the person:
(i) is ordinarily resident in Australia; and
(ii) is a Fellow of the Institute of Actuaries of Australia; and
(iii) has been a Fellow for at least 5 years; and
(iv) is not, in relation to the insurer, the chief executive officer or a member of the board; or
Note: Board is defined in rule 3.
(b) an approval of the appointment of the person under subsection
160-1 (5) of the Act is in force.
Note: A refusal by the Council to approve the appointment of an actuary is a reviewable decision under item 20 of the table in section 328-5 of the Act.
8. Declaration by the Council
(1) For the purposes of subsection 160-5 (2) of the Act, a declaration must be made in accordance with this rule.
(2) The Council may, in writing, make a declaration in respect of a person if the Council is satisfied that the person:
(a) under a previous appointment, has failed to adequately and properly perform the duties, or exercise the powers, of an appointed actuary under the Act; or
(b) does not possess the competence, character, diligence, honesty, integrity or judgment to adequately and properly perform the duties of an appointed actuary under the Act.
Note: Under subsection 160-5 (2) of the Act a person is not eligible for appointment as an actuary if there is in force a declaration by the Council in accordance with these Rules.
(3) Before making the declaration, the Council must:
(a) give written notice to the person of the matters that, in the opinion of the Council, warrant consideration being given to making a declaration; and
(b) allow the person to show cause, within such reasonable time as is specified in the notice, why the declaration should not be made.
(4) The Council must give the declaration, in writing, to the person.
(5) The declaration takes effect from the date specified in the declaration and remains in effect until it is revoked by the Council.
Note: A declaration by the Council is a reviewable decision under item 21 of the table in section 328-5 of the Act.
9. Notification of appointment etc
(1) For the purposes of section 160-10 of the Act, written notification of the appointment of a person as an appointed actuary must be given to the Council by the private health insurer within 28 days of appointment.
(2) The notice must include:
(a) the name of the person appointed; and
(b) the date of appointment; and
(c) the qualifications, experience or approval by which the person is eligible for appointment; and
(d) a telephone number, mailing address and email address by which the person can be contacted; and
(e) the name of the employer of the person appointed or, if the person appointed is a partner in a partnership, the name of the partnership; and
(f) the names of companies to which the person has been appointed a director; and
(g) a note of any interest that the person has in the operations of the private health insurer that may conflict with the duties of an appointed actuary. This interest may include, but is not limited to, pecuniary interests of the actuary, or a related person of the actuary, such as:
(i) a security in, or a contract with, the appointing private health insurer; or
(ii) the receipt of any remuneration from the appointing private health insurer.
(3) Written notification of the cessation of an appointment of a person as an appointed actuary must be given to the Council by the private health insurer within 28 days of the cessation of the appointment.
(4) The notification of cessation of appointment must include:
(a) the date of cessation; and
(b) the reasons for the cessation of the appointment.
10. Cessation of appointment
(1) For the purposes of section 160-15 of the Act, a person ceases to hold an appointment as an appointed actuary if:
(a) the private health insurer ceases to exist; or
(b) the person ceases to satisfy the criteria that are necessary to be eligible for appointment under rule 7; or
(c) the person is the subject of a declaration by the Council under subsection 160-5 (2) of the Act; or
(d) the person gives the private health insurer a written notice of resignation of the appointment; or
(e) the private health insurer gives the person written notice that the appointment is terminated.
(2) For the purposes of paragraphs (1) (d) and (e), a person ceases to hold an appointment as an appointed actuary from the date on which the resignation or termination takes effect.
Part 4 Duties and powers of appointed actuaries
11. Duties
(1) For the purposes of section 160-20 of the Act, an appointed actuary must comply with this rule.
(2) The appointed actuary must:
(a) perform each of the duties mentioned in subrule (3); or
(b) if the insurer has carried out a duty mentioned in subrule (3), other than the duty in paragraph (3) (c), and the actuary is satisfied the insurer has provided him or her with sufficient material, review the insurer's material and advise the insurer on the matter.
(3) For subrule (2) the duties are:
(a) valuation of insurance liabilities of each health benefits fund conducted by the private health insurer for inclusion in the insurer's annual financial statements that are to be lodged pursuant to the Corporations Act 2001 and returns concerning financial information required by the Council; and
(b) the development of insurance liability valuation methodology to be used by the insurer for the purposes of returns concerning financial information required by the Council; and
(c) assess the reasonableness of any discretionary margin adopted by the insurer for the purposes of assessing the capital adequacy of a fund; and
(d) the determination of risk margins for annual financial statements prepared in accordance with AASB 1023 and other relevant Australian equivalent international financial reporting statements.
12. Application of skill and diligence
An appointed actuary must comply with professional requirements applicable to the actuary and must apply skill and diligence in carrying out the duties and exercising the powers of an appointed actuary.
13. Notifiable circumstances
(1) The appointed actuary must advise the private health insurer whether he or she considers that actuarial advice on a notifiable circumstance is warranted.
Note: Notifiable circumstances are set out in subrule 5 (3).
(2) If the private health insurer requests advice from the appointed actuary in relation to a notifiable circumstance, the actuary must provide a report to the insurer on the notifiable circumstance.
(3) If the appointed actuary has not received a request for advice on a notifiable circumstance, but gives notice to the insurer that he or she believes such advice is warranted, the actuary must inform the Council if the insurer does not seek such advice from the actuary with 21 days of the notice.
(4) The report referred to in subrule (2) must include details of the appointed actuary's assessment of the actual impact, and the potential impact, of the notifiable circumstance on the health insurance business conducted by the private health insurer.
(5) The appointed actuary must notify the private health insurer of any event occurring within the fund's operations that is known to the actuary which the actuary reasonably expects to have a material impact on the private health insurer's health insurance business.
(6) Subrule (5) does not apply if the disclosure would breach a duty of confidentiality owed by the appointed actuary to a person other than the insurer, its officers or a related entity.
14. Financial condition report
The appointed actuary must:
(a) on request from the private health insurer, prepare a financial condition report in respect of each financial year; and
(b) prepare the report in accordance with the Institute of Actuaries of Australia's Guidance Note 670 Financial Condition Reports for Health Insurers, being the version of the Guidance Note last issued by the Institute before the commencement of these Rules but as if references in the Guidance Note to provisions of, and instruments under, the National Health Act 1953 were references to equivalent provisions and rules under the Act; and
(c) submit the report to the insurer.
Part 5 Reporting and notification requirements
15. Copies of reports to Council
For section 169-1 of the Act, it is a requirement that if a private health insurer makes any report to all or any of the policy holders of a health benefits fund conducted by the private health insurer, it must give a copy of the report to the Council.
Note: Section 169-1 requires that such a report be given to the Council within one month after making the report or within such further time as the Council allows.
16. Information to be given to the Council annually
(1) For the purposes of paragraph 169-5 (1) (b) of the Act, the private health insurer must give to the Council:
(a) a statement by directors of the insurer certifying that the capital adequacy margin adopted by the insurer for the financial year to which the statement relates is considered appropriate and has been endorsed by a resolution of the board; and
(b) where the board believes the sum of the claims ratio and the expense ratio, determined for the purposes of the application of the capital adequacy standard, may no longer be a best estimate of the prospective loss ratio for the purpose of calculating the unexpired risk liability in accordance with the capital adequacy standard, the insurer must provide a statement certifying that the alternative loss ratio adopted by the insurer and included in a financial statement provided to the Council is considered appropriate and has been endorsed by a resolution of the board.
Note: Subsection 169-5 (1) requires that the information be given to the Council within 3 months after the end of each financial year, or within such further time as the Council allows.
(2) In this rule, capital adequacy margin, claims ratio, expense ratio, loss ratio and unexpired risk liability have the same meanings given by the capital adequacy standard.
17. Certification requirements
(1) For the purposes of subsection 169-5 (2) of the Act, any accounts and statements given to the Council under subsection 169-5 (1) and the statements specified in rule 16 must be certified by two officers of the private health insurer to be true and correct.
(2) The certifications for any accounts and statements must be in the following form:
I, [name], certify on behalf of [name of private health insurer] that:
(a) the accounts and statements bearing this certification are true and correct; and
(b) I have the authority of [name of private health insurer] to make this certification.
……………………………………….
Certifier 1
………………………………………..
Date of certification
Note
1. All legislative instruments and compilations are registered on the Federal Register of Legislative Instruments kept under the Legislative Instruments Act 2003. See www.frli.gov.au
