The Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has cast its shadow across the Tasman. Regulators here have asked banks and life insurers to assure them that culture and conduct issues highlighted there do not occur here.
The Royal Commission’s examination of general insurance will occur in September. So, it remains to be seen what happens, but no doubt findings will focus on the worst examples of conduct, not what is representative.
Conduct will also be a feature in the review of insurance contracts law that is getting underway.
As public perception is everything, this can only undermine trust. Trust is fundamental to insurance. It’s hard to earn and easily lost. We also know trust across all sectors is in general decline. Given trust is critical and at risk, how well as a sector have we assessed the risk of declining trust and the remedy?
I’m proud of our sector and what it does, but worried too should cosy complacency get in the way of having an honest ‘outside-in’ look at ourselves.
Price and claims experience are fundamental drivers of public perception. Increasing weather-related losses, the cost of repairs to late model vehicles as well as better reflecting earthquake risk make perfect underwriting sense.
From the outside, our more vocal critics say it’s a price hike well ahead of inflation applied by highly profitable companies that look to avoid making good on a promise to pay. The spotlight now on soft and hard commission structures feeds the critics and should be causing self-reflection through the distribution chain about the real value to the customer.
Challenging traditional arrangements or ways of thinking is not easy and it can be costly to change so we can do better for the customer. Ultimately though that’s the direction of travel, so we need to get on with it.
There are signs of change like the signal that removing sales incentives from remuneration sends about where priorities lie, but that needs to run all the way along the value chain.
We also need to improve how we tell our side of the story. There’s a great story to tell about how well over 90% of claims are settled. But there’s an equally important education piece around common misunderstandings such as why we have excesses and exclusions or why we need people to disclose facts about their circumstances and the consequences of not doing so.
It’s good to see codes of conduct emerging across the sector. Conduct and culture are set at the top. It helps shape people’s attitudes and behaviours toward their customers.
ICNZ members will soon apply the Fair Insurance Code logo to make visible their adherence to the high standards embodied in that Code. It’s not just a symbol but one that speaks to a commitment to meet self-imposed timeframes for settling claims, addressing complaints and being transparent, fair and honest in all dealings with customers.
We’re also reviewing the Code to set the bar higher. Last time, we reviewed the Code we said that if what we do doesn’t make us feel a little uncomfortable, then we’re probably not doing enough.
Some would say that compliance with the law is good enough. But it’s not. That’s a culture of doing what you have to but no more. If we think trust is worth fighting for then it comes down to doing the right thing too.
