A life insurance advice model, where product issuers pay for consumers to seek independent advice, could be a way forward for the industry as it moves on from the turmoil of the 2018 Royal Commission and regains public trust, according to a senior lawyer.
By Lachlan Colquhoun
Michael Vrisakis, a partner at Herbert Smith Freehills, told the FSC Life Insurance Summit delegates he saw “scope and hope going forward for the industry”, and key to this was restoring consumer confidence in the integrity of the products, and moving away from old models of selling through call centres.
“I think the stark contrast between the sales culture and prioritising clients is really where the debate is at and should be at,” said Vrisakis.
“We live in a society where sales is an important function, so it is about culture as much as anything and changing that culture of mesmerising people with sales to working out how you can prioritise the client’s interest.”
The idea of issuers paying for consumer advice was permissible under ASIC’s conflict remuneration model, and could make a contribution to confidence, transparency and helping consumers better comprehend policies.
Vrisakis was speaking in a Summit session on Direct Insurance on what was called “Customer Day” and he was responding to an audience poll question on the question of whether the “call centre is dead.”
In response to the question 55 percent of respondents said that the while the traditional call centre was dead, it may resurface in a different form.
38 percent said the call centre was not dead, but it had a future “as part of a well-functioning direct life insurance market”, while 5 percent said the call centre would be left in the past.
The industry representative on the panel, Bronwyn Kirwan, the Head of iptiQ by Swiss Re, said it should not be forgotten that call centres did not only originate outbound cold calls, but were also there to respond to customer requests for information.
While call centres were questionable from a “sales conversion perspective” and there was “no social licence” for outbound calls, call centres still had a role in providing service.
“Humans like to have conversations with other humans about things that are confusing or complex or need demystifying,” said Kirwan.
The direct channel, she said, was also the “only truly customer led channel” where the customer was empowered to make decisions, but they were also at risk of making poor decisions because life insurance was a complex product.
“Right now there is a lack of tools and signposting to help them make good sound decisions,” said Kirwan.
The vibrancy and success of the direct channel would be reflected in the number of customers who engaged with it, this created both opportunities and obligations for insurers.
Asked whether the life insurance industry had learned hard lessons from the 2018 Royal Commission, Kirwan said that while there was “a lot scar tissue” she believed the industry was moving forward.
“I really like the phrase ‘sunlight is the best disinfectant’ and I really think we need to embrace customers’ desire for transparency around performance,” she said.
The future health of the industry depended on firms getting their culture and governance right, rather than on simply managing “to the letter of the law and avoiding fines and jail.”
Firms which invested capital in their businesses would be able to keep pace with technology change and make a sustained investment in their operating model, and this would help them bring well designed products to the market.
“They need to be priced in a way that the customer can afford to hold them for the longer term,” said Kirwan.
Customers also needed to have confidence to disclose as they purchased products, and if they did that “there was no reason why the industry should not be paying close to 100 percent of claims.”
Emma Curtis, a Senior Executive Leader, Insurers, at ASIC said that there was “no place” for cold outbound calling, and the new design and distribution regime put the responsibility on the issuer to make sure they were designing an appropriate product.
“It shifts the dynamic and brings it back to the insurer to design and distribute a product that is appropriate to the consumer,” said Curtis.
“I think this is an opportunity for the industry to start rebuilding trust with the community.”
Curtis said she saw more access to industry data as part of the solution to regaining trust.
Key metrics around claims ratios and lapse rates, outcomes and disputes were all “leading indicators” of industry performance and showed where “things are going wrong for consumers.”
Access to this data, in real time, would give both the industry and consumers a more accurate idea of the industry’s performance.
The panel also discussed the role of ASIC, and whether the regulator – which was more likely to litigate, post Royal commission – could also be a source of advice and guidance for the industry.
“Traditionally there has been some ambivalence on whether a regulator should adopt a role other than a confessor of sins,” said Michael Vrisakis.
“I am a strong advocate for saying that a regulator should not be there just to hear the sins being confessed, but should be there to provide some guidance.”
ASIC’s Emma Curtis said she saw value in this this approach, but said the regulator had to have a “dual posture” which included both guidance, and the prerogative to litigate where necessary.
“We do have an enforcement mandate and we do have to consider that,” she said.
FSC Life Insurance Summit 2020 - The FSC Life Insurance Summit continues this week until Friday 31 July.