A consumer-driven report card of life insurer claim denials, as proposed by ASIC, would result in “disastrous outcomes” for the industry, says an industry consultant.
Professional Opinions director Doron Samuell says a consumer report card highlighting the claim denial rates of life insurers is “ill-conceived” and would be “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, including claims handling time frames and dispute levels, on a per insurer basis.
Mr Samuell said ASIC is changing the drivers of insurance decision from accuracy to popularity, and it is “inviting 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,” he 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.”
Mr Samuell said 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 be heard.
“Insurers would be wise to replace their claims departments with an enlarged accounts payable service,” Mr 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 last year released the findings of its industry-wide life insurance review, saying it found “a clear need for public reporting on life insurance claims outcomes at an industry and individual insurer level”.
The COVID crisis has revealed how central banks have amplified wealth inequality in recent years, according to Schroders, with its head of A...