Warning signs for home and contents cover
With Australian insurers constantly pointing to the cost of insurance taxes as a major disincentive to home and contents cover, the recent experience of UK insurers provides an interesting perspective on the affordability problem.
Research issued by the Association of British Insurers (ABI) this month says 22% of UK policyholders have cancelled or not renewed their home contents insurance this year, while a further 17% of the 2000 respondents polled said they have stopped their building cover.
The trend is especially prevalent in Scotland, where the cancellations have affected 28% of contents and 21% of buildings cover. Some 13% of British residents have also cancelled their life insurance policies.
While that’s a huge concern to the ABI, in Australia the issue seems not to have yet appeared on the radar screen. Or – taking into account the finding that up to a third of the homes lost in February’s Victorian bushfires weren’t insured – maybe the problem has always been with us.
IAG, which operates a number of large personal lines insurance companies, declined to comment when approached by insuranceNEWS.com.au. A spokesman referred enquiries to the Insurance Council of Australia (ICA), where a spokesman said they didn’t hold such data.
Allianz Australia spokesman Nicholas Scofield says his company isn’t seeing “any real evidence that people are cancelling or not renewing insurance as a result of the economic downturn”.
In fact, Allianz has experienced double-digit growth in retail insurance lines overall, and he’s sure Australia is “not seeing anything like the fall in demand for insurance reportedly being seen in Britain”.
A spokesman for personal lines insurer AAMI told insuranceNEWS.com.au much the same story. The company has experienced “no decline in the take-up of home and/or contents policies as a result of the economic downturn”.
So the industry can relax. Or maybe not, according to social analyst David Chalke. He says local insurance demand “could still feel the squeeze at the margins”.
Mr Chalke, who runs Australia’s largest ongoing social research company Australia Scan, says while the local downturn is nowhere near as bad as the UK, “economic conditions will affect the purchase of household items, including insurance cover”.
“The pressures on people are building,” he told insuranceNEWS.com.au. “The downturn here may be more in the head than it is the pocket, but that doesn’t mean it’s not potent.”
With people becoming very careful about their spending, insurance cover is likely to come under the microscope, he says.
“The downturn has prompted a widespread review among people of what’s really important to them,” Mr Chalke said. “People become more important than things. That may bode well for superannuation and life insurance, but not so well for home, contents and cars.”
He says personal lines insurers that can offer value through flexible, low-cost policies should emerge from the economic downturn relatively unscathed, while others could suffer. It appears that it’s a good time for no-frills offerings like Bingle, The Buzz, Real Insurance and Budget Direct.
“Consumers generally are not dropping out of the food market, but they are finding lower cost, less featured, alternative label food, and they’re going to Target instead of David Jones,” Mr Chalke said.
“Within insurance you need to be offering things like pay-as-you-go and easy cancellation. The hunt is on for cheap insurance and people will be fighting over price. It’s a detuned model.”
While that would indicate a squeeze on insurer profits, on the other hand it is a good time to shout about the protection insurance provides.
“A user-friendly discounted and stripped-down model that plays on the uncertainty of the future can maximise retention of your clients,” Mr Chalke said. “Consider that insurance is a grudge purchase and people short of money are being asked to pay for an intangible item.”
Mr Chalke claims the “institutional strength” of the established brands like IAG, Suncorp and Allianz in personal lines has helped build a more reputable industry.
“A big name can be a counter to the cheap and cheerful online players,” he said. “You have to harness the attributes that work in your favour. There is no magic bullet.”
Perhaps. But as the recession continues, the call by consumer advocates for cheaper, more individually tailored insurance solutions for personal lines becomes more potent. And that may be an area the industry could usefully address.
Research issued by the Association of British Insurers (ABI) this month says 22% of UK policyholders have cancelled or not renewed their home contents insurance this year, while a further 17% of the 2000 respondents polled said they have stopped their building cover.
The trend is especially prevalent in Scotland, where the cancellations have affected 28% of contents and 21% of buildings cover. Some 13% of British residents have also cancelled their life insurance policies.
While that’s a huge concern to the ABI, in Australia the issue seems not to have yet appeared on the radar screen. Or – taking into account the finding that up to a third of the homes lost in February’s Victorian bushfires weren’t insured – maybe the problem has always been with us.
IAG, which operates a number of large personal lines insurance companies, declined to comment when approached by insuranceNEWS.com.au. A spokesman referred enquiries to the Insurance Council of Australia (ICA), where a spokesman said they didn’t hold such data.
Allianz Australia spokesman Nicholas Scofield says his company isn’t seeing “any real evidence that people are cancelling or not renewing insurance as a result of the economic downturn”.
In fact, Allianz has experienced double-digit growth in retail insurance lines overall, and he’s sure Australia is “not seeing anything like the fall in demand for insurance reportedly being seen in Britain”.
A spokesman for personal lines insurer AAMI told insuranceNEWS.com.au much the same story. The company has experienced “no decline in the take-up of home and/or contents policies as a result of the economic downturn”.
So the industry can relax. Or maybe not, according to social analyst David Chalke. He says local insurance demand “could still feel the squeeze at the margins”.
Mr Chalke, who runs Australia’s largest ongoing social research company Australia Scan, says while the local downturn is nowhere near as bad as the UK, “economic conditions will affect the purchase of household items, including insurance cover”.
“The pressures on people are building,” he told insuranceNEWS.com.au. “The downturn here may be more in the head than it is the pocket, but that doesn’t mean it’s not potent.”
With people becoming very careful about their spending, insurance cover is likely to come under the microscope, he says.
“The downturn has prompted a widespread review among people of what’s really important to them,” Mr Chalke said. “People become more important than things. That may bode well for superannuation and life insurance, but not so well for home, contents and cars.”
He says personal lines insurers that can offer value through flexible, low-cost policies should emerge from the economic downturn relatively unscathed, while others could suffer. It appears that it’s a good time for no-frills offerings like Bingle, The Buzz, Real Insurance and Budget Direct.
“Consumers generally are not dropping out of the food market, but they are finding lower cost, less featured, alternative label food, and they’re going to Target instead of David Jones,” Mr Chalke said.
“Within insurance you need to be offering things like pay-as-you-go and easy cancellation. The hunt is on for cheap insurance and people will be fighting over price. It’s a detuned model.”
While that would indicate a squeeze on insurer profits, on the other hand it is a good time to shout about the protection insurance provides.
“A user-friendly discounted and stripped-down model that plays on the uncertainty of the future can maximise retention of your clients,” Mr Chalke said. “Consider that insurance is a grudge purchase and people short of money are being asked to pay for an intangible item.”
Mr Chalke claims the “institutional strength” of the established brands like IAG, Suncorp and Allianz in personal lines has helped build a more reputable industry.
“A big name can be a counter to the cheap and cheerful online players,” he said. “You have to harness the attributes that work in your favour. There is no magic bullet.”
Perhaps. But as the recession continues, the call by consumer advocates for cheaper, more individually tailored insurance solutions for personal lines becomes more potent. And that may be an area the industry could usefully address.