“The people that can least afford to be uninsured are the ones that are.”
That was the assertion made by a broker, on condition of anonymity, in an interview with Insurance Business. Here, the industry source talks about how the current insurance market is likely pushing clients to an “I’m not going to pay that” stance.
The broker noted: “The market has contracted and hardened significantly. Distribution partnerships are evolving and dissolving, while premium rates are increasing as much as threefold in some circumstances. I struggle to understand why products of a similar nature can make massive profits within the direct market yet incur unsustainable losses within the intermediated market.
“Given that intermediated policies are already loaded for commissions paid by consumers for broker advocacy, my initial thought is that valid claims are being denied within the direct market segment.”
Providers, the source said, are ‘shedding’ and getting tougher, even towards longstanding policyholders.
“Insurers are reviewing their portfolios and having a good hard look at regions or occupations that typically run at a loss,” stated the broker. “Selected portfolios are being penalised at renewal, regardless of how long the relationship has been in place with the policyholder or what the policy claims history is like. Our clients aren’t feeling any love.”
From a consumer perspective, the source claimed that what they’re seeing is that insurers are essentially saying, ‘We don’t want to offer product ABC anymore and although we can see you have been a longstanding client of 20 years with very few claims, we are not going to transfer your good-client discount to your new inferior replacement product… That’s right, we watered that down a bit and we are actually going to charge you double because of where you live.’
The broker told Insurance Business: “Sadly, in Northern Australia, many risks have fallen into this ‘undesirable or non-preferred’ category. It’s very difficult to place commercial assets built pre-1980, of timber construction, based on a mainland island; or tourism/hospitality-related. Industrial and agricultural contractors are also proving tricky. Nobody wants to touch these risks with a bargepole. And if they do, the premiums are unaffordable to most.
“Consumers aren’t happy. This is now forcing people to self-insure (breaching their contractual obligations under their finance agreements) or accept inferior cover based on a price point. And that’s the saddest part about it, because I can’t justify the 300% or 400% increases we are seeing in some instances, or argue the value of a watered-down cover to people who can purchase online for a fraction of the cost.”
According to the source, the present circumstances are resulting in increased angst towards and within the industry. And while clients do not necessarily blame brokers, intermediaries are finding themselves caught in the crossfire.
“Most brokers know their clients personally,” said the broker, “so our clients aren’t getting mad at us; they understand that we’re just price takers and all we can do is try and get them the best cover for the best premium, which now is [very hard to do]. Brokers are bearing the brunt of this angst because we’re the people they deal with.”
“Something’s got to change,” stressed the source, “because what’s going to happen ultimately is that we’re going to end up with 50% of the population that will just go, ‘I’m not going to pay that and I’ll just take the gamble’ or ‘it’s all right, the government will bail me out’. I think it’s very dangerous territory that we’re heading into, and I fail to see how this latest round of compliance requirements is going to benefit the consumer.
“I acknowledge the intent of these regulatory reforms, but sadly they are mostly meaningless to the end user. Consumers want less paperwork, not more. They seek simplicity and we offer complexity in spades. There is a real disconnect between what consumers want and what we deliver as an industry.”
For the broker – who added that the chasm between client expectations and the reality of insurance in Australia today is “huge” – the key issues are affordability and availability.
The Insurance Business source went on to state: “We’re seeing the combined effect of an ever-diminishing global appetite for risk, COVID inertia, and financial stress translate into an underlying edginess in our industry and communities. And that’s the scariest part about it, is that our most vulnerable are actually over-exposed to underinsurance or no insurance. The people that can least afford to be uninsured are the ones that are.”
