In October 2014 ASIC released Report 415 – Review of the sale of home insurance and Report 416 – Insuring your home: Consumers’ experiences buying home insurance. In particular the reports focused on the risks of underinsurance due to customer uncertainty.
The key recommendations made by ASIC were that insurers should:
- Explain that the sum insured amount needs to enable complete replacement of contents or complete rebuilding of their home?
- provide guidance about coverage or sum insured amounts, rather than simply referring consumers to the product disclosure statement?
- refer to the Key Facts Sheet to assist decision making? and
- provide information and guidance about natural perils risks and additional rebuilding costs due to natural perils, to better estimate rebuilding costs after a total loss.
ASIC has now conducted a follow up review of insurers, acknowledging progress but also calling for further improvements.
“ASIC is keen to see industry make improvements in all of the areas identified in ASIC’s 2014 report,” ASIC Deputy Chair Peter Kell said.
“Our goal is to make sure that consumers buy insurance that better meets their needs – including by helping to reduce levels of underinsurance, especially when there are natural disasters.”
The good home insurance reforms
ASIC’s 2016 review found that most insurers have implemented, or are implementing, the following changes:
- Incorporating a sum insured calculator into point of sale processes, including through updated sales scripts, and providing better access to online calculators. This helps consumers select an appropriate sum insured amount during the quote and sales process, an important way to help reduce the risk of underinsurance? since October 2014, four additional insurers have made available sum insured calculators in both their telephone and online sales channels.
- Training staff so that information provided to consumers about the sum insured, and the maximum amount paid by the insurer, is clear and in plain English? since October 2014, an additional eight insurers have adopted this practice for their telephone sales and an additional 11 for their online sales.
- Providing information or assistance to consumers about the effect of changes to building codes which may increase the cost of rebuilding homes after a total loss? since October 2014, four additional insurers have made changes to provide this information.
Additional reforms ASIC would like to see
Further improvements that ASIC would like to see across the board, to help consumers select the right insurance cover, include:
- explaining that the sum insured amount needs to enable complete replacement of contents or complete rebuilding of their home?
- providing guidance about coverage or sum insured amounts, rather than simply referring consumers to the product disclosure statement?
- referring to the Key Facts Sheet to assist decision making? and
- providing information and guidance about natural perils risks and additional rebuilding costs due to natural perils, to better estimate rebuilding costs after a total loss.
Effective disclosure reaps rewards
Responding to ASIC’s latest report, the Insurance Council of Australia (ICA) said ASIC’s research demonstrated the industry’s commitment to helping customers choose the most appropriate products to meet their individual insurance needs.
“There is still much that can be done, but the ICA is delighted to see how decisively insurers have responded to ASIC’s recommendations after its first survey in 2014,” said ICA CEO Rob Whelan.
“The work of the ICA’s Effective Disclosure Taskforce is still in its early stages as insurers continue looking for ways to cut through the jargon and provide information more clearly and simply.”
Mr Whelan said the ICA and its member companies welcomed the opportunity to continue working with ASIC to make further improvements in providing information to their customers.
“Like all financial products, insurance can be complicated and implementing all of the Effective Disclosure Taskforce’s recommendations is a long-term process,” he said.
“Findings like this from ASIC today are a welcome signal that genuine progress is being made.”