The industry has been put on notice to expect increased focus from regulators on a range of pressing issues including pricing failures, policy wording lapses, product designs, climate-fuelled weather events, risk oversight and claims handling delays.
The Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA) say storms, floods and bushfires have stretched the industry but point out the catastrophes have revealed pressure points that need addressing.
To help the industry manage the challenges, the regulators say they have formed a joint data working group and will soon embark on a program of industry roundtables to discuss their proposals with the Insurance Council of Australia (ICA) and its members.
“We know the ICA and its members have been doing important work collecting data on disaster claims, and more recently on policies in force,” ASIC Deputy Chair Karen Chester said in a speech yesterday at the ICA Annual Conference in Sydney.
“We will use these industry data collections to support our joint work with APRA, and also as an interim measure to support our regulatory work through analytical insights.”
She says increased data granularity is important as it allows for the development of effective strategies and targeted actions to ensure insurance products are meeting consumer needs, ultimately driving better consumer outcomes.
“We acknowledge there is much that impacts the accessibility and affordability of insurance that is beyond your direct field of influence,” Ms Chester said.
“Which is why expectations are high for your performance in areas that are in your field of direct influence.
“We see the industry is in catch-up. We know this is not the ideal time to be so. But we all know the way forward… with data, with a focus on consumer outcomes… and with working together through the ICA and with us, the regulators.”
APRA Deputy Chair Helen Rowell, who spoke at the ICA event too but via video, says now is the time for insurers to step up even as the industry is dealing with a deluge of claims from this year’s floods and other catastrophes in the last few years.
She says the industry has achieved “reasonable progress” having paid out more than half of the $5.4 billion claims from the NSW/Queensland floods earlier this year.
“The industry has responded well to these events… but there is room to do better to ensure that claims – across all lines of business – are dealt with as promptly as possible,” Mr Rowell said.
She says insurance affordability and availability in areas facing heightened risk of natural disasters is one area that needs to be addressed.
“This is an area where APRA continues to focus… and insurance being too expensive or simply not on offer is a poor outcome for consumers, the insurance industry and the wider economy,” Ms Rowell said.
“The answers to the challenge of insurance affordability and availability are not simple and require many stakeholders to come together to tackle the problem. And that is occurring.”
She says APRA and ASIC are actively engaging with the ICA, and with Treasury and other stakeholders, to develop a deeper understanding of the scale and scope of affordability and availability issues, and possible options to address them.
Ms Rowell again called out the industry’s business interruption policy wording lapses that led to court challenges over pandemic claims.
She says the problems were not isolated to sloppiness with outdated policy wordings.
“This was a very basic error, but other more fundamental issues were also exposed,” Ms Rowell said.
“Key themes included miscalculation or ignoring of the potential materiality of the risk associated with the pandemic, a lack of willingness to escalate matters of concern, and complexity in policies and systems.”