There are three federal inquiries into financial services underway right now, and they’re all investigating life insurance. At the Life Insurance Claims Handling Breakfast in Sydney last week, Peter Kell, Deputy Chairman of the Australian Securities and Investments Commission (ASIC), mentioned that ASIC staff are referring to this as the “Festival of Life Insurance”, a remark which drew nervous laughter from the audience.
The life insurance industry is in the trenches, and everyone knows it. Despite ASIC’s recent investigation into life insurance finding no evidence of cross-industry misconduct in claims payments and procedures, poor public perception of the industry persists.
Reading the recent media reports on the topic, you’d be forgiven for thinking that the solution to the problem is simple: pay all genuine claims in a timely manner and everything will be fine. But it’s not that simple. The ASIC investigation found that over 90% of claims are already being paid in the first instance.
Life insurance should be more than simply writing a cheque to the right person at the right time
Life insurance should be more than simply writing a cheque to the right person at the right time. It should be a holistic service offering that gives peace of mind to customers when they’re healthy, and the support they need when they aren’t.
There is a societal need for life insurance, and customers recognise this – PwC’s recent Future of Life Insurance in Australia report states that 78% of Australians view life insurance as important. But despite over $8 billion in claims payments last financial year, customers clearly still feel they are not getting what they need.
A few years ago, I met a Tibetan monk who was visiting Australia. He asked me what I did for a living, and I responded that I worked in life insurance. “What’s life insurance?” he asked. I explained the concept of people paying a small amount of money each year to an insurance company, which would pay a large sum of money to those who were unlucky enough to die or get so sick they couldn’t work.
The man gave me a quizzical look and replied that he would have no need for such an arrangement: where he lived, when someone died or got sick, the community came together and took care of them and their family. The sick and injured were nursed back to health and, if they didn’t fully recover, they would find alternative ways of contributing to their society. The bereaved would be supported both socially and financially by their friends, family and neighbours, and would return this support in kind when they were able.
In our increasingly dislocated and isolated modern society, sources of community support are harder to find
It would be easy to argue that our system – with agreed value payouts and statutory capital reserving – is more robust than simply relying on the kindness of our community. But that would ignore the fact that, when a tragic event causes loss of life or disability, money alone is insufficient. And in our increasingly dislocated and isolated modern society, sources of community support are harder to find.
We have already seen a greater focus from life insurers in recent years on rehabilitation, empathy and wellness during the claims management process, and general health and wellbeing offerings are becoming more common as well. AIA Vitality, for example, has been a stand-out initiative, and other insurers have partnered with third party health providers to offer unique benefits to insured members. But clearly there is more we still need to do across the entire product life-cycle.
Tomorrow’s Insurers will need to be in step with customers, not only at claim time but proactively during underwriting as well. Providing quality health and wellbeing education, tailored for those with medical conditions impacting underwriting terms, will also go a long way to building consumer confidence and trust.
Throughout the ages, festivals have brought communities together, strengthened their bonds and celebrated their shared purposes. I hope we can use this Festival of Life Insurance to come together as an industry and do a better job of supporting our customers socially and emotionally, as well as financially.