2013 conference highlights
Insurance is a promise
Lawyers need to help insurers ensure the promises they make in policy documents are clear, NIBA CEO Dallas Booth told the AILA conference.
He was concerned about disputes on whether indemnity existed. “The underwriting process can’t occur once a claim is made. Insurance is about a promise. Insureds want cover confirmed as soon as possible,” he said.
He said challenges to brokers were from aggregator sites and retailers Coles and Woolworths selling insurance. “The underwriting criteria are - you’re OK if you buy milk and red meat, but if you buy pasta and rice they’re not interested.
“Brokers can’t compete against Coles and Woolworths and aggregator sites on the web, but must explain to clients the true nature of the risk and the need for risk advice.”
Mr Booth said NIBA must “cut through the run to the bottom on price”. The community had to understand insurance was not about price but about risk and policies available to cover it. It was “dangerous stuff” when consumer advocates advised purchasers to shop around on price but made no mention of comparing terms.
Mr Booth said governments and communities could not simply rely on the insurance process after natural disasters. The nature of Australian weather patterns and the concentration of the population and their buildings along the Australian coastline has meant each weather event costs considerably more than the previous.
“There’s a real strain on the cost of insurance for disasters and there’s an almost total market failure for strata [cover] in north Queensland.”
More mitigation was required for insurance to remain affordable. Mr Booth contrasted Bundaberg and Grafton floods in 2013. While the floods were comparable in size, the Queensland city sustained significant losses, but Grafton did not. Grafton had implemented better building controls and land use.
Although the Queensland Government had committed some funds for mitigation, it would take 30 to 50 years for Queensland to achieve the same level of protection as northern NSW.
Mr Booth was critical of Australia’s “one-size-fits-all” approach to financial market regulation, which he said had seen NIBA and other organisations spend “substantial effort over time to explain to governments, regulators and others that “insurance is different”.
“Why is this important? Put simply, the nature of the conversation, the nature of the product and the context of the transaction is fundamentally different between bank tellers, insurance company call centres, insurance brokers, mortgage brokers, financial planners and investment advisers.”
Mr Booth said NIBA had a role to play working with ASIC and the Federal Government to help insureds make better decisions about products they purchased and the need to seek professional advice. With the Federal Government’s impending “son of Wallis” inquiry into financial services, it was important regulators understood brokers’ dual role of acting for clients in risk financing and being the distribution process for intermediated insurers. “Many regulators think the roles are fundamentally in conflict, but brokers have been doing it that way for 300 years.”
His message for regulators was simple: “One size does not fit all.”
