Australian insurance industry to play catch up, fast
The insurance industry is currently playing catch-up due to the operational environment’s fast change, changing expectations, and new, more stringent regulatory requirements.
Legacy problems are an expensive factor for the insurance industry. Inadequate control and information systems and complexity in products, promises, and business models are two historical challenges that directly affect insurers. Climate change, the third and most pressing concern, makes it even harder for the insurance business to play “catch up.”
Pricing issues and customer fairness
For at least five years, some insurers have had pricing issues in the insurance industry. The failure to deliver on promised discounts to customers is the result of prior underinvestment in systems and controls around pricing.
More than A$760 million in refunds have been made as a result of price failure remediations, which cover an estimated 5 million insurance policies. This excludes the ongoing costs of the corrections as well as the cost of the repair.
Overall, insurers’ systems and controls have not been reliable enough to know and verify that pricing promises were kept. It’s essential that all insurers charge their customers the price they were quoted. In the first half of 2023, ASIC will report on the pricing failures review to the public.
The Insurance Council of Australia pledged in June to collaborate with the federal government and local governments “to improve general insurance affordability and availability for all Australians, particularly those in Northern Australia who are vulnerable to worsening extreme weather impacts as a result of climate change.”
The ICA took note of the corporation’s estimations that even after the pool went into operation, up to 24% of residential home policyholders in Queensland with low cyclone risk would still see premium hikes, sometimes by more than 20%.
Extreme weather conditions
Extreme weather events are occurring more frequently. Australians have endured three years of back-to-back bushfires, floods, cyclones, and the COVID-19 pandemic, which will result in more than 197,000 claims by the end of 2021.
The industry responded as it normally does in the face of disasters and managed to function quite well under pressure. However, the circumstance has highlighted pressure spots that require attention.
Resourcing will be key in playing ‘catch up’
Resourcing must go beyond a constant state of catch-up in order to improve consumer results. Insurance teams should reconsider how resources are allocated for handling claims and resolving disputes. Many firms are now turning to the contingent workforce who specialise in assembling small- or large-scale teams of individuals on demand and can assist with the creation and delivery or training if required.
How can Momenta assist you?
Depending on the needs of the project, Momenta can scale resourcing requirements up or down as necessary.
With more than 30 years of global experience within the Financial Services industry you can be assured of our ability to provide a complete cost-effective solution or specific components to compliment your current capabilities and skill set.
Our team members are seasoned, client-focused experts with the sensitivity and empathy necessary to manage claims and understand how businesses and people alike have been affected by natural disasters.
If your business has been impacted by additional regulatory or compliance pressures and needs additional staffing support in your claims handling and risk/compliance departments, speak to us to see how we can help in supplying experienced and effective members to your team.