The topic of conversation in many of the media outlets this week has been the on lack of trust that the New Zealand consumer has in the insurance industry. As much as I hate to admit it, it is a well-founded observation.
The commentators in TV, radio, newspapers and social media have avoided the single most important word that describes the purpose and objective for owning insurance; that is to create ‘CERTAINTY’.
Consumers purchase insurance to have the “peace of mind” provided by the financial CERTAINTY that, in the event of suffering a mishap covered by the insurance policy, that the claim will be paid, without question, to the full extent of the contract promise.
CERTAINTY is the missing ingredient. Plain language policies, when they were introduced in the late 1990’s, were intended to create CERTAINTY for the layperson. That is until we had a major disaster in Christchurch. The plain language policy words like “replacement value”, “as when new” or “as new” unbelievably had to have their meaning determined by the courts.
Common sense and integrity were replaced by “legal speak”.
The behaviour and delays in settling the Christchurch earthquake claims warrants urgent regulation of the claims process for general insurers.
With the latest life insurance and financial advice sector reviews, the consumer is again being ignored by the regulators’ approach to managing/regulating the integrity of the insurance industry by not addressing the claims management process.
I am embarrassed as a 40 year sales veteran to observe the industry review focusing further on regulating the sales of insurance; however, there appears to be no focus, rules or regulations offering any CERTAINTY to the insuring consumer with respect to claims management behavior of the insurance companies themselves.
Unwittingly I suspect, these same regulators are allowing the insurers to dictate their positions by being allowed to continue to market and issue policies to consumers that can be underwritten at claim time. Many policy owners are unaware that within the small print of many policies, before a claim is acknowledged and/or paid, the insurer then has the right to “check up” on your medical records, inspect your house or motor vehicle, and may require evidence of the property ownership documents.
The practice of underwriting at claims time is undertaken on almost all classes of policies including medical, life, trauma, disability, income replacement, travel, motor vehicles, and house and contents.
If, at application time, an inspection was made of the commercial building, house, contents or car, there would be no issue about modification, gradual deterioration, or pre-existing conditions; therefore this “fine print” could then be banned from the policy and the insurer would be required to improve their behavior immediately.
In the life, travel and medical areas, if medical records are requested before the policy is issued there is no opportunity for the insurer not to be fully informed of the risk and this information would eliminate almost all non disclosure issues.
Within the current environment there is no CERTAINTY for consumers while this behavior is allowed to run rampant.
During a TV3 Interview on Monday 23 June 2019 Tim Grafton, the spokesperson for the insurance industry, said that 90% of all claims are paid without question. That means that 10% of claims are investigated or at risk of not being paid. 10% is unacceptable and could be completely eliminated if regulations were put in place to ensure that all applications were underwritten correctly before the policy is issued.
Our firm recently made submissions to Government arguing for the need to explore how the insurance industry needs to modify the management of underwriting and claims. We hope our submissions do not fall on deaf ears. It is the claims management process that is in question, but all the emphasis is on the sale rather than the purpose for which the policy was purchased; financial CERTAINTY.