‘Looming’ issue insurance industry must act on now

In an address to the Insurance Council of Australia’s virtual industry forum on Wednesday, Helen Rowell said APRA has been encouraged by the effort insurers are putting in to better communicate with their clients which will help bridge “what has emerged as an expectation gap” between companies and customers, but that there is another issue that must be addressed.

“Along with an expectation gap, there is a clear protection gap looming that is potentially larger than perhaps we have observed in the recent past,” Ms Rowell said.

“This is not necessarily a problem confined to Australia and is one our peer regulators offshore also grapple with. Of course, it is entirely within an insurer’s rights to decide which risks to select, and which to avoid.

“However, when risk exclusion and avoidance burgeon across multiple products and insurers, it leads to prices that are unaffordable, or products that are simply not available. The obvious impact to consumer confidence, the wider economy and prosperity follows.”

Ms Rowell added that factors contributing to declining affordability and accessibility are complex and called for collective action from regulators as well as federal, state and local governments.

APRA’s corporate plan reiterates the importance of insurance to financial stability, which specifically notes insurance accessibility and affordability as of one of the key priorities over the next four years.

“Our focus here is on building the evidence base to better understand the issues, and magnifying our influence on contributing to a solution,” Ms Rowell said.

“This includes leveraging our supervision insights and system-wide perspective to advise stakeholders on the nature and extent of accessibility and affordability issues, and the risks that exacerbate these challenges.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.