Following an unfavourable review, the Australian Prudential Regulation Authority (APRA) has decided to form a new insurance supervision division. The regulator will also be restructuring its banking and superannuation supervision divisions along industry lines after accepting a recommendation made in the capability review report.

In a statement, APRA has said that it supports all of the 19 recommendations in the report directed at APRA with work already underway on many as part of its current corporate plan.

The capability review into APRA was started as a result of a recommendation from the Hayne royal commission final report which revealed serious cases of potential criminal misconduct in the financial services sector. Revelations in the insurance sector were among the most damaging. For instance, Freedom Insurance Group was found to have carried out dubious practices such as pressuring a man with Down syndrome into purchasing insurance over the phone.

Commenting on the capability review report, APRA chair Wayne Byres said, “The report highlights the increasingly complex industry dynamics in which APRA operates and that the expectations of its role and mandate have increased.

Appropriately, the report notes APRA has not stood still in the face of these developments, but highlights the need to accelerate the necessary changes if APRA is to remain a successful prudential supervisor into the future.”

APRA has been advised to revise its organisational structure to reinforce the impact of the leadership and cultural changes suggested by the review and APRA’s own strategic plans as well.

At the same time, the review has urged APRA to conduct regular public inquiries into the insurers, banks and superannuation funds that it supervises.

To carry out such revisions, APRA has stated that it will analyse the current roles and responsibilities of its members.