Bringing assurance back to insurance

ANZ’s white paper Life insurance: the case for change examines how the industry can collectively rebuild public confidence while delivering better, more accessible and affordable products to meet our customers’ expectations and circumstances.

Australians need to feel certain insurance, as an industry, will deliver on the promise to support them to return to their former health and prosperity if they suffer illness or injury.

With each public controversy undermining the reputation of the entire sector it is clear the ‘case for change’ rests on our collective response, to rebuild a sustainable industry that protects more Australians.

Resolving the issue

A combination of public mistrust towards insurers and the need for more affordable, accessible cover has resulted in Australians being alarmingly underinsured.

Current research by Rice Warner has found the median family’s life cover meets only 61 per cent of a family’s basic needs and 37 per cent of the income replacement level required to maintain current living standards until 65.

ANZ’s whitepaper cites the Life Insurance Code of Practice’s introduction of minimum medical definitions for some of the most common causes of claim, including heart attack, stroke and cancer, as a recent attempt to align the sector with customer expectations.

This transparency needs to extend to clearer product documentation as well as a greater advocacy of the adviser’s role in supporting customers to identify the right cover for their circumstances.

Sustainability

Providing customers with an understanding of their cover choices is important. However, this is irrelevant if the cover is still unaffordable and premiums remain on the rise.

Increasing claim costs have put the sustainability of some life insurance products at risk. ANZ’s whitepaper finds insurers continue to make losses on disability products, particularly individual disability cover, as claim costs rise rapidly. Over the past three years the sector has lost more than $A1 billion on individual disability policies.

The essential purpose of disability insurance is to financially support the customer as they recover and return to their pre-claim working life.

However, unprecedented change in technology and the workplace, alongside the recent economic downturn has resulted in a decline in claimants returning to their pre-claim work hours. 

This demographic more than any other, expects high-quality digital experiences. Despite their potential influence in the sector, ANZ’s white paper finds millennials globally are least likely to report positive experiences with their current life insurer and most likely to buy new insurance solutions from technology providers, compared to older customers.

Those who address this disengagement have a significant opportunity to claim an extremely valuable demographic that will determine who leads our sector in the coming decades.

High-tech disruption can be a good thing for both customers and insurers. ANZ’s white paper acknowledges established insurers and high-tech innovators have the opportunity to form new partnerships to meet customer demand - combining the risk-management expertise of traditional insurers with the agility and digital expertise of a technology firm.

Protection

Protecting customers financially to recover from the unknown remains the noble purpose of our industry despite the current challenges.

It is in no one’s best interest to continue allowing regulatory scrutiny to intensify at the expense of innovation.

Transparent, core-purpose insurance products should be technology-driven solutions which provide financial advisers and their clients with more choices and confidence in their selection. The end result is more balance and less risk for insurers and their policyholders.

Many opportunities for change are identified in Life insurance: the case for change. Perhaps the most important is working together, as a unified sector and as partners with our disruptors, to build a more transparent and sustainable future for insurers and the many people we aim to protect.

Alexis George is Group Executive, Wealth Australia at ANZ

Infographic sources: Apex Insights