‘Weak board decision-making’: APRA hits RAC Insurance
The prudential regulator has blasted Western Australia’s customer-owned insurer RAC Insurance, saying it suffered from “significant weaknesses” in decision-making at board level.
The insurer, part of the RAC motoring body, also fell short in its outsourcing controls and conflict management, the Australian Prudential Regulation Authority said on Wednesday.
RAC Arena in Perth. The insurer insists services for members will not be impacted by the regulatory impost.
APRA has forced RAC Insurance to tuck away an additional $20 million in capital following the governance review. Additional capital requirements mean less money is available to deploy on operations.
RAC Insurance said in a statement it took compliance and regulatory responsibilities seriously, but refused to detail the nature of problems such as in conflict management. Industry sources speculated it could relate to the separation of the insurance arm board from its motoring-club owner.
The insurer also insisted that services for members would not be impacted by the regulatory impost. The group made a profit of $46 million last year.
While APRA acknowledged RAC was implementing a plan to deal with the criticisms, the regulator said further effort was “required to ensure the changes are executed and embedded successfully, and to verify their effectiveness in addressing governance concerns”.
“Board independence and effectiveness are central elements of strong governance and were found to be lacking in our review,” APRA executive board member Suzanne Smith said.
“Boards are responsible for ensuring the risk management framework is not only implemented but effective in practice.
“The increased capital requirements reflect the heightened prudential risks and should
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