Home / Regulatory & Government / BI uncertainties remain for 'way too long': ASIC
18 October 2021
Uncertainty around business interruption cover during the pandemic has persisted for too long and has stemmed from insurers’ inadequate systems and risk management processes, Australian Securities and Investments Commission (ASIC) Deputy Chairman Karen Chester said.
“Policy wording was not updated to refer to current legislation, and it resulted in unnecessary uncertainty for insurers about their risk exposure, and for policyholders about their coverage,” Ms Chester said. “And it has been uncertain for way too long.”
Ms Chester says investment in getting data, systems and internal controls right is essential and overdue amid concern about other problems.
“Put simply, ongoing systems and process under-investment is exponentially increasing your exposure,” she told the Insurance Council of Australia (ICA) Annual Industry Forum.
ASIC has requested that insurers communicate regularly, simply and transparently with policyholders and their brokers throughout the business interruption test case process, with an appeal on the second case now expected next month.
Ms Chester also told the forum that international research on “sludge” metrics has shown the difficulties in comparing products that may be unnecessarily complex, while data offers insurers the potential to make improvements.
“There are lots of bells and whistles that are attached to insurance products that then make comparability next to impossible,” she said.
Ms Chester highlighted a recent Financial Rights Legal Centre (FRLC) paper proposing automatic pre-filling of driving and claims histories in insurance applications.
A pre-filling system exists in the UK and FRLC has urged governments and insurers to look at similar options, potentially facilitated by Consumer Data Right reforms
Ms Chester says in the UK unwitting non-disclosure had affected one in six people, meaning their motor policy then doesn’t apply.
“It has actually become junk insurance, because they have failed to disclose, so that is one really good example of an innovation, a very simple one, that has been suggested by the Financial Rights Legal Centre,” she said.