It’s easy to feel the insurance sector is under siege at present. The shadow of the Hayne Royal Commission and comprehensive review of insurance contract law seem to suggest something is fundamentally wrong with insurance in New Zealand that needs fixing.
That’s not the case, but it’s not to say things can’t be improved.
Even so, some well-known commentators have chosen this time to describe the sector as “broken”, a “wild west” or “unregulated”. Some high profile declined claims have stirred the pot further recently and led to further ill-informed media comment that an insurer was somehow trying to get out of paying a claim.
At the risk of sounding defensive, some facts would not go amiss and we should not forget what the insurance sector does well.
On delivery of the promise, the settlement of claims, well over 90% of claims are settled. If consumers are dissatisfied, we support a free review of their complaint all the way through to the binding decisions of the external dispute resolution schemes.
Last year, out of 1.2 million claims, 3,446 complaints were referred to insurers’ internal dispute resolution processes and of these 93% were resolved. Of the 243 complaints that went to the external dispute resolution schemes, just 19 were upheld.
After the Kaikōura earthquake, insurers seized the initiative to settle claims on behalf of EQC and settled the vast majority of homeowner claims within 12 months. We put our hands up to find a way to do better than the flawed model applied in Canterbury and we succeeded.
Claims were settled more quickly than ever before and the support insurers and reinsurers gave to New Zealand for these catastrophes is well over $30 billion. Meeting claims on that scale does not reflect a broken sector.
On conduct, general insurers impose on themselves timeframes for dealing with and settling claims in the Fair Insurance Code. These standards are set much higher than any legal minima and have been done voluntarily. We have spent almost a year reviewing the current Code to set the bar even higher.
It’s great to see the life insurance sector launch their Code of Conduct earlier this month, too.
Insurers rate among the best employers in New Zealand across all sectors. Many insurers and brokers recently supported the international Dive In Festival that promoted diversity and inclusion in employment. Our partners, ANZIIF, who do so much to support professionalism, also encourage one aspect of diversity with their Women’s Employer of the Year Award.
In many other ways, including through donations and sponsorships, the sector steps up to the plate to help communities around the country. We’re also there helping central and local government gain a better understanding of major risks like climate change through our insights and expertise, so we can reduce risks to better protect New Zealand.
Insurance contract law needs reviewing because much has changed in the world, let alone in insurance, in the 40 years since the most recent statute was passed and even more has changed since the oldest statute was passed over 100 years ago. This isn’t changing the law to fix insurance; it’s to bring the law into the 21st Century so it reflects the way insurance is sold and distributed today as well as better meeting consumer expectations.
We actually want change because we want consumers to have trust and confidence in insurance.
We do have a way to go to improve consumer understanding of risk and insurance. We’re working on that by supporting risk and insurance programmes in schools and working with budget services to meet the needs of the most vulnerable. We’re also using social media to educate consumers about topics like risk management and insurance fundamentals, because we know that educated consumers are more engaged consumers.
What we don’t want is superficial solutions that look good but solve nothing, like forcing consumers to focus solely on price and ignore their own specific risks, or producing summary documents that academic research shows provides no consumer benefit.
We always want to do better and we won’t always get it right, but we’re far from broken and there is a lot we do well.