Future proof: Staying on top of insurance innovation

Ever thought about taking out alien abduction insurance? Curious about ‘you are not the father’ insurance? Is your golf club ever likely to need hole-in-one insurance?

Weird as these policies may sound, they are an indication of how much the industry has evolved - although not always for the better.

What used to be a communal "pot of money" designed for community emergencies has developed into a multi-billion-dollar industry with all kinds of insurance policies available to individuals and businesses.

The constant innovation means regulators are always trying to stay on top of the changes and it can be even more confusing for consumers. So here’s a rundown of the latest innovations to help you stay ahead of the curve. And, most importantly, choose the right insurer for your circumstances.

What are the innovations in insurance?

The first insurance company in Australia was established in the 1830s. At that time, there were only a few types of insurance available: life, fire, and marine. Needless to say, the industry has changed dramatically since then. New products, such as pet insurance and travel insurance, have been created. And new technologies, such as online quote systems and the use of drones for property inspections, have been introduced.

Let's take a look at some of the most exciting innovations happening right now.

Personalised insurance

You may be familiar with this sales approach if you are on social media or use Google maps, as it allows companies to target ads for specific customers. In the insurance world, it means that customers are given a quote based on their specific needs and risk profile. For example, someone who drives a lot may be offered a different premium to someone who doesn't drive as much. TAL's new income protection insurance is a good example. It offers Income Protection Enhance, Income Protection Assist and Income Protection Focus to meet different needs.

Usage-based insurance

 

 

This type of policy is based on how you actually use your car or device instead of estimates or averages. It’s also called telematics insurance. It uses technology to monitor your speed, braking habits and how many kilometres you drive per week in your car or on your motorbike. This information can be used to calculate your premium based on the actual risk you pose as a driver.

Blockchain

This is a distributed database that allows for secure, transparent and tamper-proof transactions. In the insurance world, it could be used to store customer data or records of claims. This would create a more efficient and trustworthy system for both customers and insurers.

Insurtech

This is the buzzword for all the technological innovation that is happening in the insurance industry. This means creating products and services that reduce costs for the insurer and consumer. And it's not just limited to startups - big players such as Suncorp and IAG are getting involved, too.

On-demand insurance

This allows customers to buy coverage for a specific event, such as a wedding or a holiday. It's perfect for people who only need insurance for a short period of time. On-demand insurance is usually sold through an app or online.

Peer-to-peer insurance

This is a new type of insurance that allows customers to pool their money with others to create a collective fund. This fund can then be used to pay for claims that are too expensive or risky, such as property loss, for an individual policyholder to cover on their own.

What changes should I be wary of?

While there are some great innovations happening in the insurance industry, there are also a few to watch out for:

• • Over-insurance - This is when you take out too much insurance, which can lead to inflated premiums and unnecessary claims. This can happen when you fail to take advantage of lower premiums in return for sharing some of the risks with insurers in the form of deductibles or excesses. Shop around and compare policies to find the right level of cover for you.
  • Under-insurance - The opposite of over-insurance, this can leave you well out of pocket if you have to make a claim. A common example is not including jewellery you’re wearing in your travel insurance. It's important to speak to an insurance adviser to find out how much cover you need and what type of policy would be best for you.

How have insurance regulations changed?

The Insurance Council of Australia (ICA) has also made changes in the General Insurance Code of Practice. These changes have come about in response to the growing issues surrounding insurance policies.

 

 

One of the more pressing concerns is the unaffordability of financial advice, especially for the older generation. Insurance contracts are Greek to many of us, especially the fine print.

Another reason is the lack of transparency, particularly in the reasoning behind an insurer's decision not to pay out a claim.

The most significant change for the insurance industry is the reduced time to resolve customer complaints. Instead of 45 days, insurers now only have 30 days to resolve a complaint. The ICA has also provided an updated definition of a complaint.

Other changes include:

• • Deferred Sales Model - Under this model, an insurer agrees to delay the sale of an add-on product for four days after the sale of the primary product to give you ample time to make an informed decision.
  • Anti-hawking - This is a new provision that prohibits an insurance salesperson from offering multiple products at once. Unless you want to take advantage of bundled insurance.
  • Better disclosures - This includes clearer definitions of what's covered and not covered in a policy.

How to choose an insurer

Your insurer needs to be there for you in a crisis so it’s important you get your relationship off on the right foot. They should help you to understand the policies you are interested in, give you advice on what's available, and tell you how to make a claim with the minimum of fuss.

When choosing an insurer, there are a few things you need to look for:

• • Solid financial health - Your insurer should be able to pay out your claim, no matter how big. You can check an insurer’s financial stability by looking at their credit rating or reading reviews online.
  • Good customer service - You should be able to easily get in touch with your insurer when you need to make a claim or have a question about your policy. Check out their website and see if they have a live chat feature or a FAQ section.
  • Competitive premiums - Compare quotes from different insurers to find the best deal for you. Don't just go with the first one you come across.
  • Flexible cover - Your insurer should be able to let you convert your term policy into a whole or universal policy. This means instead of being covered for the pre-determined number of years, you’ll be covered indefinitely.
  • Tailor-made - Some insurers offer a policy that's specifically designed for your needs. This could be something like a cover for your business or an add-on product that's not available with other insurers.

How do you know if your insurer is innovative?

Not all insurers are created equal. Some are more innovative than others, and this is something else you should take into account when choosing an insurer.

One way to tell if an insurer is innovative is by looking at their website and social media presence. If it's sleek and easy to use, then it’s likely to be at the forefront of technology. Another way is to see if they offer any unique products or services that aren't available with other insurers.

You can also take the direct approach and ask. They should be happy to tell you about their latest developments and how they're using technology to improve the customer experience.

Should I choose a smaller insurer or go with big insurance companies?

If possible, choose a smaller, specialised insurer over a one-stop-shop insurer - for a few very good reasons. First and foremost, when you deal with a smaller company, you're more likely to get personalised service. Specialised insurers typically have fewer clients, so they're able to offer each of them individual attention. This means that they can take the time to learn your specific needs and find the best coverage for you.

Secondly, because these companies are specialised, they know their industry - be it travel, pets, home and contents or health - inside out. They have extensive knowledge of the products and services they offer. And they can help you choose the right plan for your needs. They're also up-to-date with the latest changes in the insurance market. So they can advise you what to watch out for.

Finally, because these insurers are small, they're more nimble and can quickly adapt to changes in the market. If you need to make a claim, for example, you’re unlikely to have to wait as long for them to process it.

That doesn’t mean you should discount the big players. Their scale means they have a lot more resources at their disposal. With pros and cons to both, it’s always a good idea to compare what's available before making a decision.

What are the top insurance complaints?

It's important to be aware of the most common insurance complaints before you sign up for a policy, as it will help you avoid problems down the road. This is particularly true of health insurance, with more than 86 percent of complaints to the PHIO received in 2019 made against private health insurers.

 

 

The following issues are the five most frequently raised issues in the private health insurance sector:

• • Benefit - This includes problems of non-payment, delayed payment, the level of benefit paid or the gap paid by the member.
  • Membership - This typically involved policy administration issues, such as processing cancellations or payment of premium arrears. Delays in providing clearance certificates when transferring between health insurers were also a major cause of complaints.
  • Service - These are about the general quality of service provided by fund staff, the quality of customer service advice and premium payment problems.
  • Waiting period - Disputes about what constitutes a pre-existing condition and how this waiting period is applied were frequent sources of complaints.
  • Information - These complaints usually arise because of disputes or misunderstandings about verbal or written information provided by an insurer. Verbal advice is the cause of more complaints. It can be particularly complex if the insurer has not kept a clear history of the complaint or recorded interactions with the complainant.

What can I do if I have a complaint?

If you're thinking of buying insurance, be sure to ask the insurer about their complaints procedure before you take out a policy with them. This will give you a good idea of how they handle customer issues. You can also read reviews online to get an idea of what other people have experienced. But beware of fake ones.

You may also check the government’s transparency report regarding the complaints received by insurers year on year.

If you have a complaint about your insurance policy, you can complain to the insurer, the private health insurance ombudsman or the Australian Financial Complaints Authority.

The organisation you choose will depend on the nature of your complaint and which one you think is most likely to help resolve it.

If you think you are not being heard, lodge your complaint with us. We can help mediate the situation and get you a resolution.

And if you're still having difficulty getting the desired outcome, we can help. Just say the magic words ‘Handle My Complaint’ and we’ll ensure your issue gets acted upon immediately.