Half of Australians think local insurers could fail in global crisis
Trust in the insurance industry is at an abysmal level as the global financial crisis sets in, prompting concerns this will affect investment and boost underinsurance levels.
While the Australian Government has been quick to protect the banking sector in the wake of the crisis, insurance has been left out of the equation – simply because it hasn’t needed protection or guarantees thanks to the strict prudential standards it operates under.
But at Zurich’s annual media briefing last week, CEO David Smith noted that negative perceptions of the industry’s vulnerability are becoming a serious reputational issue for insurers.
He says new research by ICA has found 46% of Australians think insurance companies may fail because of the global crisis. Only 22% think insurers won’t collapse.
He says this poor perception could have a debilitating effect on investors and customers and will encourage chronic underinsurance – which is already rife.
While Mr Smith was happy to discuss the latest ICA audience research, insuranceNEWS.com.au requests to ICA for more information on the survey findings have been ignored.
Mr Smith told insuranceNEWS.com.au the main issue he is concerned about is the public’s lack of confidence in the insurance sector.
“So many people think an insurer is going to fail, yet in banking the Government has come out and guaranteed deposits,” he said. “We haven’t had the same reassurance.
“Australia has one of the best insurance regulatory systems in the world and the industry is well capitalised. We are not promoting this and we should be.”
Research commissioned by Zurich in Europe found that less than 15% of customers trust insurance companies.
It also found clients don’t think insurers are easy to deal with when it comes to making a claim – they are seen as being unfair, slow and unsatisfying – and this research is consistent across Australia as well.
Mr Smith says there is a role for everyone in the industry to play in promoting it.
“The regulators have put in a regime here that they should be very proud of, and we should be promoting that.”
He says when Australia does come out of the global financial crisis and the industry has proved resilient, the prudential regulation model will be praised and other countries may consider adopting it.
“We monitor our minimum capital requirements on a daily basis,” he said. “We are well capitalised, supervised and regulated. It’d have to be a massive world crisis for Australian insurers to be affected.”
Mr Smith believes further proof the industry is well placed to ride out the financial storm is the amount it has paid out in claims and how it deals with catastrophic events.
Unfortunately these big events are very emotive, so when a thousand claims are paid out and one is not, it is that one which receives all the media attention – with the insurer portrayed as the big company beating up the battler.
“We may pay 98% of claims but we shouldn’t be paying that 2% because they’re not valid claims,” Mr Smith said.
Current global economic upheavals are doing nothing to restore public faith in the insurance industry, and if the ICA research is anything to go by, insurers and the Government have a lot of work ahead of them in convincing the public the industry is in a good position.
While the Australian Government has been quick to protect the banking sector in the wake of the crisis, insurance has been left out of the equation – simply because it hasn’t needed protection or guarantees thanks to the strict prudential standards it operates under.
But at Zurich’s annual media briefing last week, CEO David Smith noted that negative perceptions of the industry’s vulnerability are becoming a serious reputational issue for insurers.
He says new research by ICA has found 46% of Australians think insurance companies may fail because of the global crisis. Only 22% think insurers won’t collapse.
He says this poor perception could have a debilitating effect on investors and customers and will encourage chronic underinsurance – which is already rife.
While Mr Smith was happy to discuss the latest ICA audience research, insuranceNEWS.com.au requests to ICA for more information on the survey findings have been ignored.
Mr Smith told insuranceNEWS.com.au the main issue he is concerned about is the public’s lack of confidence in the insurance sector.
“So many people think an insurer is going to fail, yet in banking the Government has come out and guaranteed deposits,” he said. “We haven’t had the same reassurance.
“Australia has one of the best insurance regulatory systems in the world and the industry is well capitalised. We are not promoting this and we should be.”
Research commissioned by Zurich in Europe found that less than 15% of customers trust insurance companies.
It also found clients don’t think insurers are easy to deal with when it comes to making a claim – they are seen as being unfair, slow and unsatisfying – and this research is consistent across Australia as well.
Mr Smith says there is a role for everyone in the industry to play in promoting it.
“The regulators have put in a regime here that they should be very proud of, and we should be promoting that.”
He says when Australia does come out of the global financial crisis and the industry has proved resilient, the prudential regulation model will be praised and other countries may consider adopting it.
“We monitor our minimum capital requirements on a daily basis,” he said. “We are well capitalised, supervised and regulated. It’d have to be a massive world crisis for Australian insurers to be affected.”
Mr Smith believes further proof the industry is well placed to ride out the financial storm is the amount it has paid out in claims and how it deals with catastrophic events.
Unfortunately these big events are very emotive, so when a thousand claims are paid out and one is not, it is that one which receives all the media attention – with the insurer portrayed as the big company beating up the battler.
“We may pay 98% of claims but we shouldn’t be paying that 2% because they’re not valid claims,” Mr Smith said.
Current global economic upheavals are doing nothing to restore public faith in the insurance industry, and if the ICA research is anything to go by, insurers and the Government have a lot of work ahead of them in convincing the public the industry is in a good position.