In October 2016 the Financial Services Council (FSC) launched the life insurance industry’s first-ever industry-led consumer Code of Practice, which immediately became mandatory for all FSC members.
The Code goes beyond the existing law in many areas and requires insurers to improve disclosure to customers, provide greater transparency in communications, decide claims within set timeframes, limit the use of surveillance, and provide additional support for vulnerable consumers.
Life Insurance Code Background
The Life Insurance Code of Practice is part of a broad package of reforms in life insurance which have been rolling out over the past 18 months since John Trowbridge, a former APRA member and independent expert, announced the findings of his investigation of the life insurance industry.
Mr Trowbridge was commissioned by the FSC and the AFA to review the sector in the wake of a damning ASIC investigation into retail life insurance advice. The Trowbridge Report made wholesale recommendations to reform the industry including amending remuneration arrangements between insurers and advisers to minimise conflicts of interest. His report, along with industry negotiations, including with the AFA and the FPA, resulted in significant reforms, most of which are now laid out in legislation expected before Parliament shortly, the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill.
As part of the industry’s response to the Trowbridge review, the FSC committed to a Life Insurance Code of Practice. This will be binding on members who must be fully compliant by 1 July 2017.
NobleOak: Code of Practice a great start in building greater accountability
In light of the new Life Insurance Code, Canstar caught up with Anthony Brown, CEO of award-winning NobleOak, to discuss the new Code and the way in which insurance products are developed.
Q: Noble Oak is a strong supporter of the FSC’s Life Insurance Code of Practice. What are some ways in which the insurance industry can increase consumer trust in the industry?
A: Yes the Code of Practice is a great start in building greater accountability across all Life insurers to ensure a stronger focus on achieving better outcomes for customers, as opposed to the internal processes and systems which have been the priority of many Life insurers in the past.
Many Australian adults have dependents, such as children or elderly parents, and debt. A majority of us have experienced either first or second hand how important Life and Income Protection insurance is when an unfortunate event such as an early death or serious illness has affected a family member. While I believe most people who work for Life insurers do genuinely care about customers, bureaucracy, misaligned incentives and inflexible systems appear to have gotten in the way of delivering high quality service for the customers. The new Code of Practice will place a greater focus on customer outcomes by setting minimal service standards. It will also promote more simple language when communicating with customers. I believe the presence of the Code will shift the culture of the Life Industry to become more customer focused.
Q: Policy design is a significant part of the code. Can you explain what goes on behind the scenes at NobleOak when designing an insurance policy?
A: NobleOak offers four main covers: Life, TPD, Trauma and Income Protection. We continually refine our existing products to ensure they meet the needs of our customers and remain market leading with respect to price and benefits.
To do this, we use three main inputs when re-developing our products. Our management team uses these inputs to plan our product development cycle:
- Our customers – Our most valuable input is from our customers. We pay close attention to the feedback from our customers when they either enquire about or have taken out cover with NobleOak. For example, a number of customers requested that we include an Advance Funeral Benefit and for our Life insurance cover to be renewable until age 99 (instead of age 84). We made both of these changes last year.
- The market
If we witness a trend in consumer behaviour that we feel needs addressing, or if a competitor offers a feature which we believe would be valuable for our own customers, we will assess these opportunities to determine if we should include these features within our own products.
- Our partners – Some of our alliance partners who promote our products also receive feedback from their members or customers on our products and we include this feedback into our reviews.
Q: How often do you review the inclusions and medical definitions within existing policies?
A: We do this annually as part of our continual product development process.
Q: How is policy pricing determined?
A: Like all Life insurance products, our pricing is subject to actuarial analysis and which ensures the premiums we receive will adequately support all future claims and also importantly, be sustainable into the future. NobleOak limits our marketing and other costs so we are able to offer particularly competitive premium rates to our customers. Our aim is simply to be the best Life Insurer in the market, not the most famous!