In Australia and New Zealand, one of the biggest challenges facing insurance brokers is new regulations. Both countries’ financial services sectors are going through a period of transformation.
There are other common challenges: Increasing customer demands and ongoing pressure from a rough economy are two big ones.
New Zealand is in the middle of a major overhaul of both its financial services legislation and the bodies in charge of the regulations.
The Natural Hazards Insurance Act 2023 (NHI Act) came into force on July 1, replacing the Earthquake Commissions Act 1993 (EQC Act). This has brought changes that include new compliance obligations for insurers’ nat cat coverages and claims handling.
There’s also an ongoing government project to streamline financial services regulations. The New Zealand body that regulates insurers, the Financial Markets Authority (FMA) will have new responsibilities. The FMA’s conduct regime that applies to all financial institutions, including insurance firms, is also currently undergoing reform.
Brent McGregor (pictured above) is head of distribution for NZFSG, an aggregator in the insurance and mortgage sectors. McGregor described his firm as New Zealand’s largest financial services group, working with over 1,100 advisers.
All the new regulatory pressures, he suggested, are a big challenge because they can demand considerable amounts of time from advisers and brokers who are already time poor.
“The toughest balancing act in the current environment is for insurance advisers to manage added regulatory requirements with a brilliant customer experience,” said Wellington-based McGregor. “Many insurance advisers in our network run small, family businesses and they don’t have the resources to manage the increased admin that comes with today’s compliance requirements.”
If these industry professionals are doing all the compliance work themselves, he said, it can mean sacrificing time they would normally spend with clients.
However, much of the regulatory change has slowly implemented over the last 18 months or so. McGregor said the forward planners in the industry are likely just starting to benefit.
“Insurance advisers who have put in the work upfront and implemented compliant and sustainable business practices are finding their groove, with less hurdles and better customer outcomes,” he said.
At the recent Women in Insurance Summit in Sydney, Katrina Shanks, CEO of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), said technology will be key for insurance firms grappling with new regulations.
Recent government reviews in Australia could result in significant new legislation impacting how insurers deal with natural catastrophes, the definitions of hazard terms and how they use data.
“We’re going to get more regulation over the next few years,” said Shanks. “The important thing is that the insurers have got their technology and the data to be innovative in how they’re addressing the compliance.”
Insurers and brokers are also dealing with more demanding customers.
Earlier this year, a survey by insurance tech firm, JAVLN, asked 500 Australian brokers from small and medium sized firms for their top industry challenges. Unaffordable insurance came in at number one, but the second spot was intensifying demands from customers.
“We know that demand for customer service has increased,” said Adam Ware, director of Melbourne-headquartered BJS Insurance Brokers.
Ware’s fellow director at the firm, Sydney-based Vanessa Morton, said customer expectations around service and expertise “are so much higher” today than when she started her insurance career two decades ago.
In New Zealand, McGregor agreed but preferred to word this challenge a little differently.
“I wouldn’t describe Kiwi customers as ‘demanding’, rather, they are becoming more aware and informed,” he said.
McGregor attributed this to organisations, including educational institutions and advocacy groups, making improving financial literacy a major focus.
“If this means customers are asking more questions of their insurance adviser and wanting to make informed decisions when it comes to protecting their life, health, income and families then that means as an industry we are achieving what we’ve set out to do,” he said.
Both countries also face a tough economic climate that continues to add problems for brokers.
“Inflation, interest rates and the cost-of-living have resulted in many Kiwis being pushed backwards and having to make, often big, financial sacrifices,” said McGregor.
He’s concerned that insurance covers are often “one of the first things to go.”
Strong evidence shows that customers reduce, or even cancel, coverages when cost-of-living pressures increase.
“We’re seeing cost-saving initiatives being rolled out to assist advisers and their clients,” said McGregor. “It’s important for insurance advisers [and brokers] to check in with their clients regularly to ensure their cover is still meeting their needs and whether adjustments need to be made.”
What do you see as the main challenges facing insurance brokers on both sides of the Tasman? Please tell us below
