ICA taskforce offers recommendations on key insurance issue

ICA taskforce offers recommendations on key insurance issue

ICA taskforce offers recommendations on key insurance issue The Effective Disclosure Taskforce, set up by the Insurance Council of Australia (ICA), has revealed its findings with some key recommendations for industry.

The Taskforce has presented its findings to the board of the ICA in a report entitled Too Long; Didn’t Read and Taskforce chair, Michael Gill, stressed that the issue of disclosure is an important one for the industry.

“Not everyone can be an insurance expert,” Gill writes in the report. “Insurance terminology is difficult. Insurance law is complex. And the English language, with its uncertainties and vagaries, will always present challenges.

“Thus the industry has a role in being the principal provider of assistance to ensure that the average Australian gets the product that they truly need.

"Hopefully this Report will be the commencement of the much needed benchmarking and research to enable better answers to those questions, something more than anecdotes and one-off examples.”

The Taskforce made 16 recommendations to the board including integrating insurance calculators into sales processes in a bid to achieve a common basis across the industry, exploration of new forms of online disclosure and a Government portal linked to the release of natural hazard data for consumers to better understand their geographical risks.

Rob Whelan, CEO of the ICA, said insurers recognised the current mandated requirements were falling short and backed the industry to find a way to better itself.

“Product disclosure statements (PDS) have become so focused on complying with financial regulations and limiting an insurer’s liability that their value to customers has been greatly diminished,” Whelan said.

“The Taskforce found PDS documents are generally regarded as too long and complex, leading many consumers to simply skim them and then file them away until they need to make a claim.

“If consumers don’t understand the policies they’re buying, it can result in major financial losses, angry customers and possible reputational damage for the insurer – everyone loses.”

The report also noted that little research has been carried out on what makes a successful disclosure practice and Whelan said more needs to be done.

“The lack of empirical evidence about how PDS documents influence customers’ decision-making was identified by the Taskforce as a barrier to improvement,” Whelan continued.

“A substantial consumer research program will ensure the industry avoids spending time and money implementing product disclosure innovations that are ineffective or even detrimental to consumers.”

Whelan noted that the ICA will also call on Government to ensure customers are given the best possible advice with ASIC guidelines sometimes seen as a barrier to sound advice.

“The ICA would also like to see the Australian Securities and Investments Commission (ASIC) rethink its guidance on the ability of insurers to give advice over the telephone to customers,” Whelan continued.

“Fear of straying from the mandated general advice into the realm of personal advice means staff are often more focused on regulatory compliance than delivering the information that’s of most use to customers.”

The full report is available from the ICA website.
  • John 2/12/2015 10:31:46 AM
    PDSs really do need an overhaul. But I', concerned that these sort of taskforces are only ever going to paper over the cracks.

    To be fair, in recent years some insurers have moved away from the unfathomable antiquated Lloyd's style. But they still don't convey information in a way that a normal person understands. There are also too many grey areas in these things.

    There are things that people simply will never understand. For example, the same words falling in a different order meaning a different thing or a condition attaching directly to an insuring clause having more meaning than if both stood alone.

    In fact, I reguarly read wordings & don't know what they mean, underwriters often can't definitively clarify certain points & claims staff reguarly interpret things wrongly.

    It would be worthwhile for the taskforce to think completely outside of the box. For example, consulting psychologists & marketing experts for a different take on effective communication. Obviously this doesn't want to be at the expense of style over substance but I don't think it would hurt to look at things differently.

    Another option could be a prescribed standard wording with set endorsements. This would need to be done carefully & might not work but is worth considering.

    Post a reply
  • Rolf Van Dulst 2/12/2015 10:45:37 AM
    The premise that the role of insurers is to be the principal provider of assistance to ensure Australians get the product they need is totally inaccurate, that is the role of brokers. Insurance brokers spend years developing knowledge and experience in order to provide personal advice to clients. Trying to provide this level of service through call centres, which are often not even in Australia, is fraught with danger for insurance buyers. Insurers are attempting to muddy the waters by stating that "consumers don't want advice, they want guidance." What utter rot. Purchasers of insurance want what all consumers want and that is to be able to make informed decisions given a range of options.
    ASIC has personal advice restrictions in place for a very good reason. A broker providing personal advice to a client has no conflict of interest, they are required by law to consider the clients best interests above all else. Insurers dealing on a direct basis have no such legal requirement. Insurers dealing direct are incapable of providing impartial advice and we only need to look at the problems faced by the Financial Advisor industry to see results of insurers trying to give personal advice.
    This initiative by the ICA is nothing more than an attempt by insurers to strengthen their direct offering at the expense of brokers and consumers. I would encourage ASIC to recognise Recommendation 13 for the cynical attempt it is by direct insurers to control more of the distribution network and grow their profits.
    Post a reply