Standing by the customer – but at what cost?
Clearly, Australia’s general insurance industry is rising to the occasion in its support of clients affected by the Victorian bushfires, as well as the flooding in Queensland and New South Wales.
The scrutiny by media and politicians is intense, particularly in Victoria. If the Prime Minister’s unfair and unnecessary “I’m watching you” message was not motivating enough, the news media’s insatiable hunger for hero and villain stories is.
Newspapers and radio stations in Victoria have been awash with advertisements from insurers expressing sympathy and outlining support initiatives for bushfire victims. Only the most misguided cynic would suggest they’re engaging in window-dressing. The concern expressed broadly by the industry for its customers affected by the bushfires is entirely genuine, motivated by a corporate sense of decency and also because it’s sound business practice.
It would be indelicate at this point to talk about how rates will be affected, although that hasn’t prevented some media outlets engaging in a spot of speculation. Nor is this the time to point out the impact of high insurance taxes on affordability, although that time is fast approaching.
Adjusters are still out in the field and claims processes are at various stages of development. More to the point, people are still displaced and individuals and communities are only just beginning to grieve.
Journalists are also beginning to ask how insurers will regard future coverage in the high-risk bushfire zones, as evidenced at IAG’s media briefing last week about its projected half-yearly results and capital-raising. Will premiums jump in fire-affected areas – and will insurers want to offer cover at all?
CGU’s CEO Duncan West, for one, has spoken out strongly to reassure clients that his company will continue to offer insurance in areas devastated by the bushfires. It was hardly a statement of Churchillian proportions, as one media outlet naively claimed, but it would have been welcomed by insureds who are determined to rise out of the ashes and build again.
Insurance, says Mr West, is about pricing risk. No one will argue with that, although it does leave open the question about the future affordability of cover in high-risk areas.
Other insurers will echo Mr West’s pledge that CGU will work with the Victorian Government and communities to learn the lessons of the bushfire and help people reduce the risks.
As an example of this commitment, he says CGU will support tougher building standards and cover the cost of compliance for clients who have suffered property loss or damage in the most recent Victorian bushfires when they rebuild.
That raises a few more questions. For starters, when the time comes to renew, where will it leave policyholders in designated risk areas who have not lost property and whose homes do not comply with new building rules? Will they face an affordability squeeze?
And if they do, will it force them to underinsure so that the ugly problem of underinsurance and non-insurance is perpetuated?
There’s no easy answer here, and thinking outside the square is required.
With the shock of the bushfires receding and the call for causes and effects coming under scrutiny, there’s an opportunity looming for the industry and governments and, very importantly, those who pay for insurance, to analyse the problems and sort out some lasting answers.
The inquiries to follow over the next six months or so, and the media’s much greater focus on the value of home and contents insurance, mean there’s no going back.
The scrutiny by media and politicians is intense, particularly in Victoria. If the Prime Minister’s unfair and unnecessary “I’m watching you” message was not motivating enough, the news media’s insatiable hunger for hero and villain stories is.
Newspapers and radio stations in Victoria have been awash with advertisements from insurers expressing sympathy and outlining support initiatives for bushfire victims. Only the most misguided cynic would suggest they’re engaging in window-dressing. The concern expressed broadly by the industry for its customers affected by the bushfires is entirely genuine, motivated by a corporate sense of decency and also because it’s sound business practice.
It would be indelicate at this point to talk about how rates will be affected, although that hasn’t prevented some media outlets engaging in a spot of speculation. Nor is this the time to point out the impact of high insurance taxes on affordability, although that time is fast approaching.
Adjusters are still out in the field and claims processes are at various stages of development. More to the point, people are still displaced and individuals and communities are only just beginning to grieve.
Journalists are also beginning to ask how insurers will regard future coverage in the high-risk bushfire zones, as evidenced at IAG’s media briefing last week about its projected half-yearly results and capital-raising. Will premiums jump in fire-affected areas – and will insurers want to offer cover at all?
CGU’s CEO Duncan West, for one, has spoken out strongly to reassure clients that his company will continue to offer insurance in areas devastated by the bushfires. It was hardly a statement of Churchillian proportions, as one media outlet naively claimed, but it would have been welcomed by insureds who are determined to rise out of the ashes and build again.
Insurance, says Mr West, is about pricing risk. No one will argue with that, although it does leave open the question about the future affordability of cover in high-risk areas.
Other insurers will echo Mr West’s pledge that CGU will work with the Victorian Government and communities to learn the lessons of the bushfire and help people reduce the risks.
As an example of this commitment, he says CGU will support tougher building standards and cover the cost of compliance for clients who have suffered property loss or damage in the most recent Victorian bushfires when they rebuild.
That raises a few more questions. For starters, when the time comes to renew, where will it leave policyholders in designated risk areas who have not lost property and whose homes do not comply with new building rules? Will they face an affordability squeeze?
And if they do, will it force them to underinsure so that the ugly problem of underinsurance and non-insurance is perpetuated?
There’s no easy answer here, and thinking outside the square is required.
With the shock of the bushfires receding and the call for causes and effects coming under scrutiny, there’s an opportunity looming for the industry and governments and, very importantly, those who pay for insurance, to analyse the problems and sort out some lasting answers.
The inquiries to follow over the next six months or so, and the media’s much greater focus on the value of home and contents insurance, mean there’s no going back.