Insurers must be fair in making decisions on whether to insure someone’s risk, and they need to show themselves to be fair, says Danny Joffe, senior legal advisor at Hollard Broker Markets.
Insurers can make a profit, despite the increasing amount of pro-consumer regulation, says Joffe in a piece in the April of FA News. The recently-released draft Policyholder Protection Rules (PPR), only adds to this burden, but still, Joffe says a profit can be made.
“In times of increased unpredictability regarding weather patterns, as well as the country’s crime fighters having their hands full in fighting crime, the need for insurance solutions is increasing. It can only mean sustainability should not be a problem for those insurers willing to invest in treating customers fairly,” says Joffe.
He says insurers need to accept that making a profit cannot be linked to making tough decisions on who to insure. It can also not rely on irresponsible advertising that could entice a customer to buy a policy that is inappropriate or may not deliver on the promise they expected.
Instead, insurers will have to get used to being fully transparent and consistent in their dealings with customers. They will also have to collect good-quality data they can use to demonstrate that they made their decisions in a fair and consistent manner.
If the regulator’s PPR proposal is accepted, an insurer will have to give applicants proper reasons for declining their insurance, even if they are not yet a client. The insurer also has to treat applicants fairly and consistently.
Insurers do have science and technology on their side, says Joffe. “The more data they gather from clients, the more accurate they can be in declining the bad risks and giving accurate ratings for the risks that need to be more carefully managed.
“It is in the client’s best interests that the schemes be managed profitably and cancellations are inevitable if the insurer begins losing money. Profitability and sustainability of insurers are in everyone’s interest and looking after good clients is critical when managing risks,” he writes.
“If full disclosures are made, surveys and actuarial conclusions shared and transparent technology used to detect fraudulent or untrue claims, insurers’ reputations will become enhanced as being fair and trustworthy,” says Joffe. “As a result, this should attract more and better business. Insurers will always be willing to do what it takes – within reason – to achieve this relevance.”
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