CommInsure general manager of retail advice Tim Browne has called for the risk insurance sector to learn the lessons of general insurers in the aftermath of the recent floods and implement standardised definitions across their policies.
Browne said the life industry was headed for the same scrutiny as general insurers, who, earlier this year faced widespread public wrath and government scrutiny over their definition of the word “flood”.
Late last year and early this year, many flood victims, left homeless by raging waters, learned their insurance policies didn’t cover the catastrophes because the floods stemmed from rising rivers. The fine print of many policies showed policy holders were covered for flooding from storms – but not flooding from rivers.
“Off the back of the floods, general insurers moved to look at a standardised definition of flood cover,” Browne told InvestorDaily.
“To my mind, it’s entirely predictable that the same questions would be asked of the life insurance industry. We as an industry need to contemplate standardising definitions on the life side.”
He said standardised definitions across the life insurance industry would be a win-win outcome.
“It would create greater certainty for consumers, and that would lead to improved levels of confidence and trust between the consumers and the industry.”
Asked which body would be the most logical to spearhead the effort, Browne named the Financial Services Council (FSC).
He said the move had risks attached, such as the possibility of restricting innovation and the potential to lessen competition. However, he said adviser had a better chance of steering the debate if they were the ones who launched it.
