Clearview's Simon Swanson (top left), MP Tim Wilson (top right) and members of the IAC (bottom)

The Insurance Council of Australia (ICA) has revealed it is working on a project with independent consultants to design a form of pandemic insurance in Australia.

During a public hearing for the economics committee to scrutinise the insurance sector on Tuesday, ICA head of risk and operations Karl Sullivan responded to a question by MP Tim Wilson about whether there was any discussion in relation to domestic pandemic insurance.

“We are doing work with consulting actuaries on that particular issue,” replied Mr Sullivan.

Sullivan went on to explain that while pandemics were generally excluded from insurance contracts because of their sheer size it was an issue that a number of jurisdictions were “coming to grips with”.

The ICA is working with independent actuarial and analytics firm Finity to find out “what a particular approach might be to cover an insurance event like a pandemic”, Sullivan revealed.

The work is currently at the “broad options” stage, Sullivan explained, but the ICA was looking at having it completed in the next two months.

The ICA is the representative body of the general insurance industry in Australia. It’s understood the project with Finity is part of a suite of projects the ICA is undertaking, alongside climate change initiatives, in its efforts to make a ‘more insurable’ Australia.

During a morning session at the inquiry that saw executives from the ICA, the Australian Financial Complaints Authority and insurer Allianz face questioning, parliamentary representatives brought up a number of issues related to the insurance industry’s progress since the Hayne royal commissions and its handling of the coronavirus crisis.

Flexibility and compassion

A glaring omission from the morning’s session was any detailed discussion around letters ASIC sent to insurers on Monday imploring them to show flexibility and compassion to consumers who are undergoing financial hardship.

“Where consumers are no longer able to pay premiums due to reduced income, insurers should consider how they can best respond to this issue in order to help consumers continue to maintain key insurance coverage to protect essential assets,” a letter to general insurers stated. “This might include, where appropriate and reasonable, measures including premium ‘holidays’, deferrals, or reductions for a reasonable period of time.

“Insurers should not automatically cancel or lapse policies for non-payment of premiums but continue cover for those policies for a reasonable period of time, while working through further options that may be available for the consumer to retain their cover,” the letter continued.

In a separate, similarly themed letter to life insurers, the securities regulator asked them to go “beyond” provisions in the Life Insurance Code and review options for premium holidays for consumers unable to pay due to reduced incomes.

“We recognise that some insurers introduced this type of flexibility in response to the tragic bush fires of summer 2019-20, and we consider a similar approach is just as important now, given the broad effect that the Covid-19 pandemic is already having on many Australians,” the letter states. “We expect insurers to try to find workable options to allow consumers in hardship to continue their cover.”

Several major insurers were contacted with respect to their ability to meet ASIC’s request, but most were unable to comment at the time of publication due to their involvement in the senate enquiry.

Insurer Metlife did send out a sponsored note saying it had introduced a three-month premium waiver on its life insurance and income cover for voluntary unemployment, as well as other concessions.

Simon Swanson, chief executive at financial services provider Clearview, also revealed in the first post-lunch session of the senate inquiry that the firm’s insurance division was “allowing premium wavers and suspension of cover” during the coronavirus period.

 

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning. Contact at tahn.sharpe@conexusfinancial.com.au
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