Life insurance claims handling
A speech by Peter Kell, Deputy Chair, Australian Securities and Investments Commission, Money Management’s Claims Handling Breakfast (Sydney, Australia), 16 March 2017
Last year was an important one for life insurance, and that seems likely to continue this year and beyond. We have recently seen the introduction of important reforms by the Government for raising standards around life insurance advice, although that is not my focus today.
Clearly there is also an increased public focus on the life insurance industry in respect of claims handling and that is what I want to discuss with you today.
The industry has recently been under intense media, government and regulatory scrutiny in relation to conduct and culture concerns.
One pleasing aspect of this is a positive response from many in the industry to address the concerns that have arisen. An example is the launch of the Life Insurance Code of Practice in October last year, which has sought to lift standards across the industry. We look forward to working with industry as the Code is implemented and further enhanced and more broadly applied across industry, and consideration is given to lodging with ASIC for approval.
Today I will focus on claims handling, and I have three main topics that I would like to talk about:
- First, I will talk about ASIC’s 2016 claims handing review.
- Second, I will highlight some of ASIC’s priorities for 2017.
- Third, I will comment on some aspects of claims handling particularly pertinent to life insurance in superannuation.
Clearly, claims outcomes are of key importance to consumers, as this is when the value of the policy is realised. Our work in this area confirms the importance of a strong firm culture that puts consumers first.
We are focusing on culture in our work at ASIC this year and we will embed this in our thematic reviews. A key issue in relation to culture is the linking of performance benefits to factors that can harm consumers; for instance, linking incentives to declined claims rates.
This is in conflict with the claims assessor’s responsibility to assess claims on their merit, and can have a detrimental effect on genuine claims.
Where we see poor indicators of culture such as this, it indicates to us that there may be issues that we need to look further into. Culture is a key consideration for us in undertaking our work in relation to claims handling.