“It is quite an interesting, unique and complicated market but at the same time, exciting as well,” said Antonie Jagga (pictured above), PwC Australia’s insurance leader.
Jagga was commenting on what his global professional services firm’s annual insurance industry risk report concluded about Australia.
“Insurance Banana Skins - An Australian Perspective,” is arguably novel for focusing on what the insurance industry itself finds concerning in the risk landscape. Most industry reports of this kind focus on insurers’ customers concerns.
He said insurers in Australia face “a raft of competing priorities.” He included increased regulatory requirements, climate-related disasters and the rising price of insurance products.
“The complexity of the Australian insurance industry in particular is on the higher end compared to that global spectrum, in my opinion,” said Jagga.
While the local market is relatively small given Australia’s population of about 26 million, he said the “huge geographic spread” of these potential customers is one challenge.
“Most of those areas are also fairly exposed to a wide range of different natural perils, whether it’s fire, flood, cyclone, earthquake, hail, damage, storm,” said Jagga.
The maturity of the market, he said, also brings challenges.
“People are generally sophisticated in how they buy insurance products,” he said. “What I’ve observed in Australia in particular is that the customers really have high expectations when it comes to insurance products, insurance conduct and what the insurer does.”
The relatively high standards of the country’s regulators can also make it tough, he said.
“The regulators here have a very high bar in terms of what good looks like,” said Jagga. “They tend to be leading the charge globally, in my view.”
He said that means compliance is not just a routine requirement “but it’s really trying to be best in class, I would say.”
The report said this is causing local insurers to be more concerned about their reputations.
Jagga’s PwC colleague, financial services industry leader, Barry Trubridge, said these worries are “particularly acute for Australian insurers.”
Unlike the other countries covered by the survey, reputation came in as the fourth top concern for local firms. On average across the rest of the world, this risk didn’t even make the top 10.
“We believe this is because it’s linked with concerns over climate-related challenges, such as natural disasters, which create a need for insurers to provide rapid support,” said Trubridge.
He said insurers can “make or break their reputation” during these rapid response events.
“It’s really down to the high expectations placed on insurance by customers and regulators, and the way the Australian market operates in dealing with things like pricing promises and government investigations, for example into the 2022 floods,” said Jagga.
He said customers expect “really good products” that meet their needs and provide good value. They also expect openness and transparency from the insurer.
Regulators, he said, are also pushing up insurer standards.
“Regulators then expect you to go beyond minimum compliance, and really act in the best interest of your customer,” said Jagga.
In some countries, he suggested, complicated product disclosure statements (pds) that cover the insurer from a legal perspective are considered sufficient. Not in Australia.
“The product disclosure needs to be in the interest of the customer,” he said.
Jagga said insurers are held to account when they don’t get this balance right between legal competence and value for the customer.
“That’s probably why there’s a bit of a heightened reputational risk in Australia, compared to the rest of the world,” he said.
The survey also found that insurers are worried about technology. This comes despite many big insurers constantly upgrading their technology and engaging in ongoing digital journeys that, you might think, could be a source of confidence rather than concern.
“That’s an interesting juxtaposition,” said Jagga. “I think most of the insurers recognize that they really have to undertake these transformation programs because they fundamentally believe that they will be more agile, more resilient and be able to grow to meet customers’ needs if they are more technologically sophisticated.”
He said the concern stems from the complexity of these digital journeys because of legacy systems, mergers with other firms using different technology and the continual pressures of daily business.
“I think it’s less about lacking confidence in them having to do these technology upgrades and more that they are pretty complex, hard to get right and can take longer than people would expect or think is ideal,” said Jagga.
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