Changes for the insurance industry in 2014
Tim Grafton, CEO of the Insurance Council of New Zealand, discusses the changes and challenges ahead in 2014.
Video transcript below:
Reporter: The New Zealand insurance industry has definitely gone through some major changes in recent years. Tim Grafton from the Insurance Council of New Zealand talks about the changes and what the key issues are for 2014.
Tim Grafton, CEO, Insurance Council of New Zealand
Tim Grafton: There are 4 or 5 key issues for us here in NZ in 2014, Canterbury is probably at the top of the list. We have to manage the demand surge that’s coming through this year in terms of the rebuild and that’s going to mean, having to get local and central government agencies on board as part of the solution as well. It’s not just an insurer or an [AQC] issue to address, it’s everybody involved. Secondly but it’s an election year, so there is politics involved.
We have got a merger acquisition in train at the moment. The Commerce Commission needs to make the decisions on that, yet we also have promises out there to establish Kiwi Assure, so there are politic issues that we’ve got to manage as we go through this year. Then there is the regulator, started full licensing with the RBNZ this year, so the important thing is to have dialogue with them and ensure that New Zealand remains a good destination for capital investment in insurance.
Fourth area is public education. We just got to keep on educating the public around insurance issues and we have got a whole strategy to roll out as well and I guess the fifth ongoing issue is around pre-disaster resilience building and in that area we have just got to ensure there is greater alignment across central and local government in terms of the decision making, planning and infrastructure build, that will keep insurance affordable as we go ahead over the decades.
Reporter: As a result of Canterbury, the Fair Insurance Code has definitely been stress tested. What’s come out of this experience that needs to be addressed?
Tim Grafton: First of all the Fair Insurance Code doesn’t respond to catastrophe of that size, it talks about having a quick settlement of claims. Well in the Canterbury situation we can’t have that. So what does it mean in terms of the post catastrophe, how do you deal with the Fair Insurance Code in that outcome and I think the second and third areas are better education that we have go to provide to insureds when they buy cover. What does the cover actually mean? What are the exclusions? So there is little or no room for doubt in their minds, because that out of Canterbury has come questions and doubts about what their cover included and equally when it comes to settlement, what is the rationale for settlement, so that the insureds have a better understanding of that. Those are three areas where I think improvements are needed. I think the outlying question is better sanction, should there be some form of sanction and if so what and that’s something really for our Board to consider in due course.
Reporter: The role of the broker is also changing and evolving.
Tim Grafton: Rapidly changing industry, there are major changes for brokers ahead I believe. We have got mergers and acquisitions on the cards all the time. That can squeeze brokers choices. I think also there is price sensitivity in the market as well and in the online space we’ve got the very likelihood of aggregators price comparison sites coming round the corner. So when you start to bring that into the equation, for the broker they have got to really start to demonstrate their value add to the customer. I think disclosure of fees and commissions is something that we are going to have to go to. We have it in real estate, we have it in share broking, it’s going to come to brokers and that disclosure will mean that they are going to have to demonstrate that value add more than ever and I think total risk management packages are options that they could be providing to their insureds in order to demonstrate the value, rather than simply selling on insurance product and that will also bring with it the need for better marketing of their services and ultimately if you are a smaller broker, you are going to have to find that niche where the relationships are very special and go beyond what perhaps the larger brokers could provide.