Life too important to baulk at change
Amid the overwhelmingly negative media coverage of alleged problems within CommInsure's claims handling procedures, something important was overlooked — a number of major insurers received awards for their innovative product development.
Those awards were presented just ahead of the annual Financial Services Council (FSC) Life Insurance Conference and, as one of the judges for those awards, I can attest to the fact that I and my fellow judges had clearly in mind the central importance of claims management in the insurer/consumer relationship and the overwhelmingly negative perceptions generated by the media reports.
It follows that a number of the products which received recognition, including AIA's e-claims and BT's Advanced Terminal Illness Payment, are clearly aimed at making life easier for consumers as, rightly, they should.
But here's the rub. As innovative and well-targeted as these sorts of products may be, the proof of the pudding will be in the eating and ultimate consumer digestion will take place at claims time.
All of which will come as no surprise to specialist life/risk advisers, most of whom will know only too well the capacity for insurance claims departments to be "arbitrary", "obdurate" and, if we are to believe Col Fullagar, just plain "bullying".
What is more, people such as Fullagar will attest to the fact that some of the less attractive traits exhibited by insurance claims departments have become more pronounced since the global financial crisis and the impact it had on company profit and loss statements.
Nor is it lost on anyone that in the past five years, significant Australian life insurance businesses have moved into foreign-ownership — TAL was delisted from the Australian Securities Exchange and was acquired by Japan's Dai-Ichi Life, NAB/MLC has recently entered into a transaction which sees its insurance business acquired by Nippon Life and barely a fortnight ago, and Macquarie moved to sell its insurance business to Zurich.
Does this mean that life insurance has become unprofitable in Australia? No. But what it does mean is that the provision of life/risk insurance is complex and sensitive to a multitude of externalities such that it does not always sit comfortably on the balance sheets of Australian publicly-listed companies. For vertically-integrated financial services companies there are certainly easier ways of making money.
By the end of last week it had become obvious that the Government was intent on letting the Australian Securities and Investments Commission (ASIC) and the Senate Committee handling the Scrutiny of Financial Advice to extend its terms of reference to deal with the allegations raised against CommInsure.
What both ASIC and that committee will find is that it is one thing to pursue the issues of adviser remuneration, it is entirely another thing to understand the complexity of insurance policies and claims-handling procedures. Nonetheless, neither the politicians nor the regulators should baulk at the task.
The problems which have gained so much coverage in the media are neither new, nor company specific.
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