ASIC’s life insurer report card would be ‘disastrous’: consultant

An industry consultant has said that ASIC’s report card on life insurer claim denial rates is “inviting disastrous outcomes” for the industry.

Professional Opinions director Doron Samuell said in a blog recently that a consumer report card that highlights claim denial rates of life insurers is “ill-conceived” and “a pointless and potentially dangerous exercise”.

ASIC and APRA launched the pilot phase of a project in early May to collect and publish life insurance claims data on a per insurer basis, and include data on claims handling time frames and dispute levels.

Dr Samuell said this would change the drivers of insurance decisions from accuracy to popularity, and invite "disastrous outcomes".

“While it is perfectly appropriate for regulators to monitor the life industry, they make no mention of the potential consequences of their costly meddling,” Dr Samuell said.

“Executives in every insurance company will be devising strategies to focus on performing well in those tables. The most obvious way to achieve those outcomes is to pay more claims.”

Dr Samuell noted that insurers will understand that the lowest decline and complaint rates will be most popular with consumers.

He said the only parties who could complain about such an outcome are shareholders, and their views won’t make it onto the table.

“Insurers would be wise to replace their claims departments with an enlarged accounts payable service,” Dr Samuell said.

“Disability insurance premiums continue to rise. With ASIC’s new initiatives, it is foreseeable that it will be a giant nudge towards market unsustainability.”

ASIC released the findings of its industry-wide life insurance review last year, saying it found “a clear need for public reporting on life insurance claims outcomes at an industry and individual insurer level”.

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