A risk consultancy firm believes there could be “dire ramifications” for both insurers and consumers if the corporate regulator continues its drive for transparency on declined claims.
The Risk Store founder Sue Laing says greater claims transparency will lead to an unsustainable life insurance industry with higher premiums.
“If, rather than ASIC simply demanding reporting consistency for the regulator’s own monitoring and regulatory purposes, the regulator drives the open publication of a ‘leader board’, the ramifications are dire,” Ms Laing said in an open letter to ASIC and insurers.
“Pressure from consumers on one side to be presented with the ‘best’ decline rates to choose from plus pressure on claims outgoings to have the ‘best’ decline rates by paying out more than should be paid from the other side can only mean one thing rearing its head in the middle for insurers.
“Premiums would have to rise. Sustainability would be the victim, and this would snowball into an affordability backlash from advisers and consumers alike.”
Ms Laing said it was impossible to probably collate claims data in Australia due to its lack of consistency.
“Deeper down is the serious danger posed by the apparent contemplation by ASIC of forcing insurers to report publicly on ‘decline’ rates, while there is a blatant inability across the industry to standardise that reporting and make it logical, meaningful and sufficiently educational to allay overreaction to those rates,” she said.
Ms Laing also noted the complexities around understanding decline rates, saying that the local industry had not adopted the standardised international code for reporting claims causes.
“A true decline is a claim that has been assessed on its merits and deemed not to fit the relevant definition based on medical evidence,” she said.
“So, many ‘declines’ are not assessed and rejected claims; rather they are claims that were never going to be claims at all or that cease being claims for legitimate reasons that do not involve any assessor’s judgement.”
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 20 Jul 2018CPA shuts financial advice divisionBy Reporter
- 20 Jul 2018Don't neglect AI, advisers warnedBy Tim Stewart
- 19 Jul 2018AMP unveils new in-house training programBy Reporter
- 19 Jul 2018Self-licensed adviser cops 4-year ASIC banBy Reporter
- 19 Jul 2018Hub24 to launch new core offeringBy Reporter
- 19 Jul 2018SMSF sector warns about advice ‘exodus’By Miranda Brownlee
- view all