New decade, new challenges We surveyed 12 industry leaders for their assessments of the future for insurance in Australia. The result: many hurdles ahead, but also opportunities By Bernice Han
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ore than a year has passed since Commissioner Kenneth Hayne handed his final report to the Federal Government, but anxiety over the impact of his proposals on the industry continues to run deep. An Insurance News 2020 Vision survey has secured detailed responses from a dozen of the most prominent and influential general insurance chief executives in Australia. Respondents were asked to rank key challenges and opportunities, and identify the five most significant changes set to impact the industry, as well as explaining what keeps them awake at night. Regulatory reform and compliance topped the list as the most pressing challenge, with nearly 92% of respondents naming it as the biggest hurdle their businesses must work to overcome this year. Climate change and extreme weather events placed a distant second, with just one respondent listing it as the most worrying issue on his agenda. The prevailing low interest rates environment, competition, staff retention and recruitment, and the state of the global economy were less of a concern, according to the survey. Not a single chief executive viewed
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any of the four potential business risks as their number one or second challenge. That insurance leaders continue to be overwhelmingly consumed with whether their businesses are ready for a Haynescripted regulatory regime should come as no surprise. In the months after receiving the royal commission’s report, the office of Federal Treasurer Josh Frydenberg has been running at a dizzying pace to adopt all 76 of Commissioner Hayne’s proposals to reform the financial services sector, including insurance. The political pressure was ignited the moment the royal commission heard directly from consumers who recounted their experiences of being on the receiving end of unjust, deceptive financial practices. Very few of the travesties that came to light had anything to do with general insurance. Nevertheless, a number of the royal commission’s suggestions, once implemented, will discard long-established rules that have governed the way the industry operates. Insurance contracts, for instance, will have to comply with unfair contract terms laws after Federal Parliament recently
passed the Financial Sector Reform Bill 2019. Claims-handling is another area facing a significant overhaul. It will become a financial service overseen by the Australian Securities and Investments Commission from July, with draft legislation already tabled by Treasury. Suncorp Insurance Chief Executive – and Insurance Council of Australia President – Gary Dransfield sums up what the industry could be in for as the regulatory reforms kick in. “The post-Hayne world is seeking to define what ‘fairness’ for customers looks like in an insurance context, but runs the risk of tilting the scales towards excessive benefits for some individual claimants at the cost of more expensive insurance for everyone,” Mr Dransfield says in his survey response. “The view of what is fair held in certain regulatory and quasi-regulatory domains may be at odds with what the bulk of the insurance-buying public think is fair to all policyholders.” So vexing is the regulatory challenge that a number of respondents believe it will continue to shape the industry in the next five years. A few even admit the matter is giving them sleepless nights.
