Recent natural disasters have highlighted the gap between a consumer’s understanding of their home insurance policy and its actual terms – leading to dissatisfaction and underinsurance. 2015 could see action to rectify this.
Two recent reports by the Australian Securities and Investments Commission (ASIC) highlighted poor selling practices, gaps in consumer understanding and decision-making and underinsurance. According to ASIC, the key findings from the reports were:
- Most insurers have adopted a 'no advice' or 'factual information' business model, which means they are unable to provide consumers with the information and/or advice they needed.
- Most consumers 'guessed' the sum insured they required, often using faulty assumptions.
- With price the dominate factor, most insurers attempt to reduce the premium by reducing the sum insured and/or increasing the excess, potentially increasing a consumer's risk of underinsurance.
The result is a proposal that regulations be altered to allow a greater transfer of information between insurers and consumers. We will wait to see what occurs in 2015.