Insurers are being challenged to increase their transparency, with APRA’s Executive Director of Insurance Sean Carmody saying a more transparent industry is a more trusted industry and that transparency will help build a more resilient community.
In a recent speech, where he shared some perspectives on the current state of the industry and the actions that can help underwrite a strong future, Carmody told the industry APRA and ASIC believe that transparency is “…critical to improving a range of consumer outcomes.”
As to what the regulators mean by transparency in insurance, Carmody says it includes being clear on:
- What is, and is not, covered by a policy
- The factors that drive consumers’ premiums
- Which mitigation actions by consumers will, or will not, reduce premiums
- How insurers will use information provided, such as the results of genetic tests
Carmody says a lack of transparency erodes trust “…which undermines the effectiveness of communication. Over time, an investment in greater transparency can help to build trust.”
…product innovation also has the potential to help address the protection gap…
He notes too that product innovation “…also has the potential to help address the protection gap and is another area that could benefit greatly from transparency.”
To design sustainable products that work for both insurers and their customers today, and in the years ahead, he challenges the industry to:
- Design products and services that are of demonstrable value to the community
- Ensure these products reach the most suitable target market: be clear who the product is designed for
- Simplify your products and processes and review them regularly to adjust to changing consumer needs
- Use plain English product disclosures and don’t hide the devil in the detail
- Be fair and clear in your pricing, ensuring it aligns with good product features
- Ensure you have a clear, open, empathetic, fair and speedy claims process.
He concludes that the industry is on the right track with the basics of good insurance risk management.
“This is fundamental to ensuring it has the financial capacity to fulfill its purpose: supporting their current and future customers in times of need, when their house flooded, their car crashed, or their health deteriorated.”
…communities today are facing real challenges regarding affordability and accessibility that need to be addressed…
“However, communities today are facing real challenges regarding affordability and accessibility that need to be addressed.”
Carmody says APRA recognises that “…closing the protection gaps in insurance is an example of a ‘wicked problem’ that poses complex issues and will require sustained action by industry, all levels of government and the community.”
He notes that APRA highlights the issues facing the insurance industry and is supporting the collective work on solutions.
“I encourage all insurers to take ownership of these challenges and to find opportunities to make a difference. Harness the talent and innovative power we have in the industry to help shape the future,” he says.
Click here to read Carmody’s full address.
