Don’t say you weren’t warned!
The Effective Disclosure Taskforce, set up by the Insurance Council of Australia (ICA), has revealed its findings with some key recommendations for industry.
The Taskforce has presented its findings to the board of the ICA in a report entitled Too Long; Didn’t Read and Taskforce chair, Michael Gill, stressed that the issue of disclosure is an important one for the industry.
“Not everyone can be an insurance expert,” Gill writes in the report. “Insurance terminology is difficult. Insurance law is complex. And the English language, with its uncertainties and vagaries, will always present challenges.
“Thus the industry has a role in being the principal provider of assistance to ensure that the average Australian gets the product that they truly need.
“Hopefully this Report will be the commencement of the much needed benchmarking and research to enable better answers to those questions, something more than anecdotes and one-off examples.”
The Taskforce made 16 recommendations to the board including integrating insurance calculators into sales processes in a bid to achieve a common basis across the industry, exploration of new forms of online disclosure and a Government portal linked to the release of natural hazard data for consumers to better understand their geographical risks.
Rob Whelan, CEO of the ICA, said insurers recognised the current mandated requirements were falling short and backed the industry to find a way to better itself.
“Product disclosure statements (PDS) have become so focused on complying with financial regulations and limiting an insurer’s liability that their value to customers has been greatly diminished,” Whelan said.
“The Taskforce found PDS documents are generally regarded as too long and complex, leading many consumers to simply skim them and then file them away until they need to make a claim.
“If consumers don’t understand the policies they’re buying, it can result in major financial losses, angry customers and possible reputational damage for the insurer – everyone loses.”
The report also noted that little research has been carried out on what makes a successful disclosure practice and Whelan said more needs to be done.
“The lack of empirical evidence about how PDS documents influence customers’ decision-making was identified by the Taskforce as a barrier to improvement,” Whelan continued.
“A substantial consumer research program will ensure the industry avoids spending time and money implementing product disclosure innovations that are ineffective or even detrimental to consumers.”
Whelan noted that the ICA will also call on Government to ensure customers are given the best possible advice with ASIC guidelines sometimes seen as a barrier to sound advice.
“The ICA would also like to see the Australian Securities and Investments Commission (ASIC) rethink its guidance on the ability of insurers to give advice over the telephone to customers,” Whelan continued.
“Fear of straying from the mandated general advice into the realm of personal advice means staff are often more focused on regulatory compliance than delivering the information that’s of most use to customers.”