Currently showing: Funding longer lives > Health/medicine

19 Jul 16 04:10

We are all familiar with the famous saying attributed to Chinese folk law 'may you live in interesting times'. It is considered to be the first of three curses, the second being 'may you come to the attention of people in authority' followed by what sounds like the answer to a well known U2 refrain, 'may you find what you are looking for'!

Whether one sees the prospect of living in interesting times as a source of worry or a reason to be excited, will depend upon the natural disposition of whether you're an optimist or pessimist – to see change and challenge as something to fear or rather toembrace and turn into opportunity.

We are certainly living in a world of interesting times - and evidently not always in a good way. A world where unexpected outcomes seem to prevail over common expectations. Who would have thought six months ago that England could beat the Wallabies 3-0 on Australian soil, or that the UK would vote for Brexit, or most shockingly, that Iceland and Wales would make it through to the final rounds of Euro2016! What's next- Donald to trump Hilary?

But what of life insurance?

Interesting times indeed - without a doubt. A time across the industry for reflection and rejuvenation. A time to challenge ourselves to ensure we have the customer at the centre of all that we do and to ensure we achieve outcomes which balance the needs of each part of the value chain - from customer to advisor; from advisor to insurance company; from insurance company to employee; from employee to shareholder and from shareholder to the broader community.

In order to convert these "interesting times" into an opportunity to achieve better outcomes I see five priority areas the industry needs to focus on.

1. Reducing complexity

We all know it - our business has become extremely complex over its long but largely positive history. Products and systems tend to be add-ons over time rather then re-based or overhauled as necessary. Legacy begets complexity making it difficult and expensive to unravel with the passage of time. We also speak in corporate and legal jargon making it complicated and complex for our customers. Plain language, we fear, creates ambiguity in our contracts and heightened anxiety in our legal departments. We have to rise above the excuses defending complexity, lest they alienate our customers or make them suspicious of our motives.

2. Creating certainty on claims

I firmly believe no one in our industry deliberately tries to avoid paying a rightful claim to an eligible customer. We have all subscribed to the industry creed 'we are in the business of paying claims' - that is our contribution to society and our means of helping people in their time of need. For most of us it is why we love the industry we are part of, why we come to work every day. However for the sake of all customers it's important that the right claims are paid ie. those that satisfy the conditions of the contract between customer and insurer. There is a lot of focus on this area at the moment and in the vast majority of cases we do a very good job paying the right claims in a timely and empathetic manner. Hopefully the various reviews of claims practices and the new Code of Practice will drive the industry to even higher standards in this crucial area.

3. Pricing risk sustainably

The recent industry Group risk crisis showed us how underpricing can create dislocation with dramatic impacts on affordability and continuity of cover. Overpricing is equally, if not more, disruptive and inequitable. As an industry we should seek to set sustainable prices which are affordable long term, deliver fair claim outcomes and yet include appropriate profit margins for insurers. The industry needs to make profits in order to reward those who put their capital at risk and also to generate reinvestment. An unprofitable life industry is no good to anyone but too much profit will not deliver the right customer outcomes over time.

4. Improving access to cover

We should be proud of our industry in many respects on its commitment to customer reach. The compulsory superannuation system provides a strong platform for universal life and disability cover for working Australians. Outside of this, cover is also available via several channels - through an intermediary or directly from life companies. We provide multiple ways for consumers to access the incredibly important products designed to help people protect their own as well as their family's futures against unforeseen difficulty and hardship.

But we can do more and we need to make it easier for customers to understand their own personal protection gap and how to address it through choosing the most suitable products tailored to their needs. There are still customers falling between the cracks who when ill health or hardship befalls them would benefit from more insurance. We need to embrace new technologies to help accelerate the process and improve customer access to our solutions.

5. Incentivising good health

The life insurance industry has a pivotal role to play in promoting and rewarding good health - not for the exclusive interest of making profits but genuinely for the benefit of society. Many companies are investing heavily in broadening their brand proposition with health and wellness programs - this must be applauded and further encouraged. Life insurers' growing role in rehabilitation and return to work support is also a positive trend. A claimant's return to good work when well supported by the industry is incredibly beneficial for the individual and for society in general. 

Over and above these five areas of focus, we also need to reference another highly valued virtue in Chinese traditional culture: harmony. We need to find harmony in the role of the life industry balancing outcomes for its customers, shareholders and the wider community in which we all belong.

So to return to the purported Chinese curses I began with, for curse number one we are certainly living in 'interesting times' both in our wider world as well as in life insurance environment. We are at a crossroads but I believe if we focus on the five areas outlined above along with a healthy attention to harmony among our various stakeholders we can be optimistic about our industry future.

Of the second curse of 'coming to the attention of people in authority' well if we do the right thing by our customers and foster an appropriately profitable industry then we will attract the right kind of regulator interest so this curse shouldn't be feared. In doing so the third curse will also be nicely taken care of as our customers and our employees will 'find what they are looking for'.

Bono would be proud.

Category: Funding longer lives: Health/medicine

1 Comment

Alicia Montoya - 19 Jul 2016, 9:45 a.m.

Leigh, you make many great points and succintly summarize all the key ingredients for the overhaul the re/insurance industry needs. Bravo!

One that is perhaps not fully developed above and which I think is also a big challenge for the industry and yet another reason why people like me don't buy insurance (yes, I'm part of the protection gap!) is the sense that current insurance products are not here to help me live a better life but rather something designed by lawyers, for lawyers, probably for their gain and my loss. Exclusions and bad press (sometimes deserved, sometimes not) about unpaid claims don't help.

So I think for me, as a digital native / borderline millennial, the key to win me as a customer is:- modular products --that I can pick and mix from-- built around my needs (and not your departments)- transparency: share your stats, help me understand, help me make better product choices, track them and adapt as I see fit. Give me the information and the power to act on my choices. Involve me and be open.

Hope that helps clarify what would win me over as a customer... and look fwd to all the changes you mention above! :)

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