Insurers face consumer bullets

by Resolve Editor Kate Tilley

Consumer NZ surveys show New Zealanders have an aversion to organisations that make excessive profits and it is likely insurers will be in their firing line, Consumer NZ CEO Jon Duffy told the NZILA conference.

He said Consumer NZ research showed the cost of living was at the top of New Zealanders’ concerns and their mood was pessimistic. “There’s a distrust of institutions. Consumer sentiment tracking shows trust is declining.

“People are spending their savings and that will affect the insurance industry. Insurance is a necessary evil, a grudge purchase,” Mr Duffy said.

After the cost of living, other key concerns for New Zealanders were the economy; housing; crime and gangs; health care; Covid-19; poverty and inequality; and climate change.

In the same panel session on industry perception and performance, Sarah Knox, consumer affairs manager at the Insurance Council of New Zealand, said ICNZ quarterly tracking of the favourability of insurers showed a decline in 2018-19, but a slow incline since 2020.

Experience v perception

“The data is for insurers generally. People with direct experience with their own company have a more favourable view. It’s experience versus perception,” she said.

There were negative headlines in 2018-19 about insurer conduct and that correlated with the time frame for the decline. Ms Knox said: “We sell a future promise and people hope that if they have a claim it will go well.”

Focus group research showed insureds did not trust insurers to pay claims and felt they would “try to weasel out through fine print”. “Price and claims experience are the touch points with focus groups.”

There was an “information dissonance” because insurers knew what was in their insurance contracts but consumers did not read them until claim time.

Banks fared better than insurers in consumer surveys but had more regular contact with customers. Ms Knox suggested insurers could partner with insureds on risk reduction as a means of improving consumer perception of them.

Low-hanging fruit

ICNZ had launched a consumer advisory committee (CAC), based on an Australian model, to advice the board on ways to improve customer outcomes.

The CAC had “picked some low-hanging fruit” to start with, for example, insurance education; one-page policy summaries; engaging with Pasifika (Pacific nations people now living in NZ) channels; customer care statements; and standard definitions.

The CAC was focusing on vulnerability and had established a learning group to identify where ICNZ members sat on 40 criteria.
 
Ms Knox said ICNZ claims data from August 2022 showed 78% of claims were accepted and processed “with no problems”; 18% were accepted with some problems; and 4% were denied.

Of 1.1 million claims received in 2021, 9,661 went to internal dispute resolution and 212 to external dispute resolution.

Financial advisers shrink

Katrina Shanks, CEO of Financial Advice New Zealand (FANZ), told the panel a new licensing regime was in progress for financial advice providers (FAPs), which would reduce accessibility to FAPs because there would be a likely 5%-10% reduction.

From March 2023, FAPs must achieve a level 5 qualification in advice and cannot accept soft incentives or volume-based commissions.

The Conduct of Financial Institutions (CoFI) legislation, overseen by the Financial Markets Authority (FMA), introduces a new regulatory regime to ensure licensed insurers and other financial institutions comply with the fair conduct principle when providing services to consumers. 

Ms Shanks said a 2022 FMA survey showed 52% of those surveyed trusted FAPs, but that was up from 12% “a few years ago”.

FANZ’s survey found 94% of respondents who used a FAP rated them “good or very good”.

Ownership concentration

In a Q&A session facilitated by NZILA immediate past president Myles Noble, from Crombie Lockwood, Mr Duffy agreed IAG NZ’s 2014 purchase of Lumley General Insurance NZ created a higher concentration of insurer ownership. It was too early to measure the impact but it was likely to lower consumer perception of the insurance industry.

Ms Knox agreed with Mr Noble’s suggestion “a lot of people don’t know how to complain” about their insurers. She said ICNZ data showed a low knowledge of the complaints process but ICNZ continued to promote the fair insurance code to encourage a deeper understanding.

Ms Shanks said: “It’s about accessibility and making the process easy.” She said it was more complex with life insurance because someone could have a policy in place for 20-30 years before they made a claim.

“What can the industry do to be more loved?” Mr Noble asked.

Mr Duffy said: “People lack understanding of what they are covered for. Be more upfront with people. They are time poor, make things simple for them. But I’m not naïve enough to [think a policy] can be summarised in one page.”

He said there was value in the broker model, if a broker was acting in a client’s best interests. Some selling practices in the past had been “problematic” but there was “regulation in the pipeline that may change that”.