A radical overhaul of the product disclosure process has been envisioned, calling for personalised, targeted electronic disclosure and greater use of sum-insured calculators.
Earlier this year the Insurance Council of Australia (ICA) established an Effective Disclosure Taskforce, tasking leading insurance lawyer Michael Gill to respond to long-standing insurance industry concerns about the currently mandated product disclosure requirements.
His report, entitled Too Long, Didn’t Read, was released yesterday, making 16 recommendations for overhauling product disclosure.
Key planks of the recommendations are greatly improving the integration of insurance calculators into the insurance process, particularly for home building cover.
The report also calls for exploring new forms of electronic disclosure that are more engaging and can better target the information most applicable to individual customers, as well as encouraging governments to create a central repository of natural hazard data to better help consumers mitigate their own risks.
ICA CEO Rob Whelan says the current PDS requirements were not fulfilling their primary purpose of helping consumers buy insurance to meet their needs.
“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,” he says.
“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 ICA has accepted all of the taskforce’s recommendations and will now begin consumer research to ensure any product disclosure innovations are effective.
“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 says.
“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.”
Last year, an ASIC report found the current compliance environment meant most consumers were purchasing home insurance with no advice whatsoever.
To read the full report, click here.