Fairness to customers should be “a given” and “put on a pedestal” by insurers, the Actuaries Institute says.

Record numbers of complaints, bad publicity and parliamentary inquiries suggest there is a “groundswell of views in the community that insurance is often unfair”, it adds in a report.

Actuary Ian Laughlin has challenged insurer boards to strengthen their oversight of fairness by making regular checks on how product, pricing and claims philosophies are put into practice. 

“Community concerns with fairness in insurance require attention at the highest levels in the insurance industry,” he said. “Fairness should be put on a pedestal.”

Boards are best placed to oversee fair treatment of customers, he says, because they are accountable for corporate values, culture, risk appetite, strategy, customer interests, remuneration and compliance.

Mr Laughlin – a former deputy chair of the Australian Prudential Regulation Authority, OnePath Life chair and AMP Life director – says most concerning are complaints about steep premium rises, “lowball” cash settlements after the 2022 floods, and loyal customers being charged more than new ones.  

“If you don’t have strong levels of mutual trust, respect and fair treatment, the system will struggle,” he said. “Customers are buying something intangible – they’re buying a promise, and they expect that promise to be met.”

He says board members should ask how suitable products are for different socioeconomic groups, whether regular reviews of customer complaints are undertaken, and how managers comply with fairness obligations and assess customer relationships.  

Increasingly sophisticated and complex insurance products and changing community expectations are challenges, Mr Laughlin says, recommending analysing the views of “those with the worst, as well as the best, experiences”.  

“Boards and companies need to understand what’s happening in those cases. Fair and good treatment of customers should be a given,” he said.

The institute says culture is critical in maintaining fairness, and staff and management attitudes should be considered in any assessment.

Remuneration, incentives and recognition can all “encourage behaviour and decision-making which could lead to unfairness”, it says.

Mr Laughlin recommends fairness be addressed in the Financial Accountability Regime statements that will apply from March, and that boards consider a “customer fairness filter” when setting remuneration and assess attitudes and behaviour around respect for customers.  

See the institute’s paper here.

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