“Catastrophes should no longer be catching insurers by surprise,” said Prue Monument (pictured above), general manager of Code Compliance and Monitoring for the General Insurance Code Governance Committee (GICGC). “If this is the new normal, insurers need to adjust accordingly.”
Monument’s separately operated unit is part of the Australian Financial Complaints Authority (AFCA). As she considered this year’s industry challenges, Monument said regulators like AFCA and the Australian Securities and Investments Commission (ASIC) no longer see natural disasters as out of the ordinary.
So in 2023, insurance companies can’t use disasters as excuses for poor service and other compliance failures. Monument said insurers have always been in the business of responding to catastrophes and that must be an ongoing focus.
“That’s their business, right? But it’s the relentlessness that is new,” she said. “I’m sure you’ve seen the letter that ASIC rolled out to all insurers leading into the next season of catastrophes and thinking about how insurers are readying themselves for this new reality.”
The ASIC letter, sent out late last year, set out what the regulator expects of insurers to be better prepared for catastrophes, including adequate resourcing and training.
“I think ASIC accepts that changing resource levels alone is not likely to address the problem in its entirety,” said Monument. “But I think insurers – and I know many of them already are – are looking at their broader operating models to make sure that they’re sufficiently agile and responsive to deal with the current challenges that seem to be the new normal.”
Monument detailed other challenges in 2023 including the tail end of COVID-19, the tight labour market and the geopolitical instability creating supply chain issues.
“All of those things are such a challenge but ASIC, and also the Code Committee, is really urging insurers to be proactive and think about how they need to position themselves to deal with this,” she said.
Monument said “the big issue” over the next year from a compliance perspective is - as in previous years – around timeliness and communication.
“That’s more of an immediate operational challenge that insurers need to deal with,” she said. “We know that insurers are struggling to meet their timeframes but what’s happening is poor communication is just exacerbating things and consumers are understandably complaining.”
Monument said this can be an opportunity for insurers to “get on the front foot.”
“Engage regularly with consumers, keep them up to date on how things are progressing and manage the expectations of the consumers about when they’re likely to receive an outcome or what the next steps are going to be,” she said.
The Code Committee’s compliance boss said this can de-escalate matters and ensure consumers are well informed.
Part of dealing with this challenge, she said, is focusing on internal feedback loops. Monument said the insurance industry has invested in their systems and is getting better at identifying issues, recording and reporting them.
“I think it’s then about using that data and information themselves internally,” she said. “So how they can self-diagnose their own problems and fix them proactively to reduce consumer detriment.”
For example, she said, if insurers are declining lots of claims in a certain area, what does that tell them about the product design and disclosure?
“They need to be doing that analytics and self-diagnostics to constantly improve their offering for consumers and reduce consumer detriment,” said Monument.
In November, the GICGC reported a “substantial increase” in significant breaches of the General Insurance Code of Practice. Twenty-two (22) insurance companies reported a total of 116 significant breaches, up from 57 in 2020–21. However, the Committee’s data for 2019-20 – a time period that was also mostly free of COVID-19 impacts – showed 112 significant breaches of the Code, very close to 2021-22’s.
During the last financial year, the GICGC also opened 170 investigations into insurance companies. The large number is actually fewer than in 2020-21, when the GICGC looked at 195, according to the Governance Committee’s recently released annual report.
“I think it’s [the number] got to be kept in perspective,” said Monument during an interview with Insurance Business published last month. “It does seem like a high number but some of those can be quite quick to resolve once we look in a little bit more detail at the issue.”
Only 17 breaches were identified, she said.
Most of the breaches, said Monument, related to the complaints and dispute handling obligations of the Code.
