Has COVID-19 shown regulators that insurance is trustworthy?

Has COVID-19 shown regulators that insurance is trustworthy? | Insurance Business

Has COVID-19 shown regulators that insurance is trustworthy?

When it comes to COVID-19 crisis response, Australia and New Zealand have been praised for having some of the most successful outcomes in the world – and, according to insurance and financial services sector bodies, this success has also translated into a better relationship between regulators and insurers, who have been an integral part of a network of financial support measures.

Sally Loane, CEO of the Financial Services Council Australia says Australia and New Zealand are similar in many ways, and both have managed to gain control over a rapidly accelerating health crisis. She says the economic crisis is now the ‘clear and present danger,’ and that financial services has a huge part to play over in the recovery.

“We’re two similar island countries who moved very quickly before the rest of the world, and I think that’s why Australia and New Zealand have done particularly well in dealing with this health crisis,” Loane said.

“What keeps me up at night is the economic crisis that’s looming. That is the clear and present danger to everyone.”

Read next: IAG forms specialist team to support customers affected by COVID-19

“We have a massive government and taxpayer-funded job keeper and job seeker programme with AU$130 billion+ put in already, but we don’t expect now to have an economic ‘snap-back’ as we thought might happen,” she explained.

“I think this is going to be quite a long and slow journey, though, on the other side, we’ve all seen a massive time-lapse video of the way we’ve all embraced technology, and that’s opened up enormous opportunities - particularly in the way that we deliver financial services.”

Loane says the demand for financial services has increased massively over recent months, with customers wanting to know that their investments, insurance and assets are being well managed during this volatile period. She says the lockdown has also been a good opportunity to work with regulators, and to defer some of the regulatory changes that had been in the pipeline for 2020.

Read more: Transitional licensing to be delayed until next year

“We’ve done a lot in life insurance, particularly as the health crisis has rolled out,” Loane said.

“What we did for our members immediately was to go to the regulators and say ‘we want this list of things deferred, nobody has the bandwidth to achieve this regulatory change now.’ Luckily, the regulators reacted, and we’ve had a number of deferrals as has happened in New Zealand too.”

Over here, ICNZ chief executive Tim Grafton says the crisis has proved to regulators just how well the insurance industry can respond to the needs of customers during tough times. He says that, contrary to the impression given by various reports and reviews last year, he believes insurers have now demonstrated that when things get tough, they will throw all their resources into providing financial support and put customer outcomes front and centre.

“Over the last two months, we’ve been very fortunate in that we acted early,” Grafton said.

“We did a COVID-19 BCP plan around three or four weeks before we went into lockdown, so we were well prepared even before the government ordered a lockdown.”

“We looked carefully at support measures for customers, and that enabled us to engage with regulators and assure them that the sector has treated its customers with the utmost priority when the chips are down,” he explained.

“I think our conduct has validated what I’ve always believed this sector does, and I think regulators have recognised that.”

Grafton says that, in many ways, the situation has brought the insurance sector closer to the regulators, who responded by pushing back a significant pipeline of regulatory reform. Several key pieces of legislation have been pushed back until early 2021, including the long-awaited start of the new financial services regime.

“There’s been a coming together and a common understanding, and the issues going forward will be how deep the recession is going to be, and to what extent insurers can continue to support those in financial hardship while also balancing their own solvency concerns,” he said.

“We’ve looked at things through half a dozen lenses - customer outcomes and how that’s going to play out, and that flowed into reputational impact and how claims were developing.

“Regulatory and government responses, liquidity and insolvency issues - all of those were looked at, and then the operational effect of this on the sector. I think the sector has played this out really well, and that has lots of implications for the future.”