Insurers must unburden themselves of the old structures and systems preventing them from meeting younger consumers’ needs, Australian Prudential Regulatory Authority Executive Member Geoff Summerhayes says.

He told the Actuaries Summit in Melbourne last week that actuaries have an important role helping insurers rationalise legacy, reduce operational risk and maximise opportunities provided by the digital revolution.

“We operate in a market steeped in tradition and burdened by a complex legacy of outdated products, systems and business practices,” he said. “This legacy heightens operational risk and makes it challenging to adapt to the needs of the changing consumer.

“Operational risk issues can erode consumer confidence and community trust.”

New consumers expect corporations to be socially responsible, with a recent Nielsen survey showing almost 75% aged 34 and younger will pay more for brands committed to “positive social and environmental impact”.

Companies that act contrary to stated values will suffer reputational damage via social media, as happened when United Airlines recently dragged a passenger from an oversold flight, Mr Summerhayes says.

The Australian insurance sector has suffered reputational damage due to add-on insurance practices in general insurance, operational claims issues in life insurance and a lack of disclosure in health insurance. Mr Summerhayes says these issues are having an adverse impact on the insurance sector’s role in the community.

“There is a trust gap and it needs to be improved,” he said. “And so it’s not a question of whether the industry needs to change its thinking about consumers, because consumers have already changed their thinking about the industry,” he said.

The challenge is to respond and keep pace with increasing expectations, he says.