The ingrained sales culture of life insurers has led them to employ several practices that give cause for concern, the prudential regulator says.
In a speech to the Actuaries Institute in Sydney, APRA deputy chairman Ian Laughlin said due to their focus on sales and distribution, insurers have been acting in ways that “do not meet standards of fundamental good practice” in insurance management.
“[These practices include] product features added at no cost or with little analysis of impact [and] definitions that are open to interpretation or prone to obsolescence,” Mr Laughlin said.
“[Also included are] various basic problems with underwriting and claims management, and a lack of information to support proper analysis."
Mr Laughlin said that the “advent of questionable practices” has been driven by insurers’ desire to score well in product ratings to make them more appealing to advisers and to capture more business.
“Not only can this undermine sound insurance management, but it often will result in features that are not necessarily needed or wanted (or understood or appreciated) by the customer,” he said.
Mr Laughlin also highlighted a number of factors that have been having a “profound impact” on life insurers, including a “drive by the legal profession” to generate business by advertising assistance with claims.
“Partly due to that point, [there has been] an increased willingness to lodge claims years after the event, which means TPD claims have become increasingly long-tailed,” Mr Laughlin said.
Other changes included a heightened awareness of death and disablement benefits provided through superannuation, he said.