Vol: 44 Issue: 2 | Aug 2021
On 25 January 2020, Victoria reported the first confirmed case of COVID-19 in Australia. According to the Australian Department of Health, as of mid-June 2021, Australia had experienced just over 30,000 cases and 910 deaths.
While state and federal governments moved quickly to control the pandemic using social distancing, masks, work-from-home arrangements and lockdowns, these actions came with an economic cost.
According to the Australian Bureau of Statistics (ABS), in April 2020 underemployment reached a record high of 13.8 per cent. An estimated 1.8 million Australians were working reduced or zero hours. By May 2020, 870,000 people had lost their jobs.
For many Australians, paying the bills — including their insurance premiums — became a challenge. For others, making an insurance claim became more difficult to do, while a swift financial settlement was suddenly more essential than ever.
RESPONDING TO HARDSHIP
Roy Morgan reports that 10.8 per cent of Australians who experienced adverse employment changes due to COVID-19 reduced their insurance payments or put their cover on hold.
Based on 2017 ABS census data, this figure represents more than 950,000 insurance clients.
Faced with a significant uptick in financial hardship claims across the board, the watchwords for insurers over the past 12 months have been ‘flexibility’ and ‘empathy’.
A QBE spokesperson says: ‘A key component for us in handling hardship claims during this period was to ensure our frontline teams were empowered to identify customers experiencing hardship and offer temporary relief options in the first instance.
'We wanted to ensure, where possible, that the customer’s experience involved as few touchpoints as possible to make the process more efficient and empathetic.’
Life insurer TAL agrees. ‘Paying our customers’ claims is the most important thing we can do,’ says Alex Homer, TAL chief customer and brand officer. ‘Early on in the pandemic, we brought together a specialist taskforce to consider the different impacts COVID-19 might have for our customers making claims.
‘We swiftly developed and launched a range of measures to help customers at their time of claim.
'This included establishing a dedicated team of experts across our claims and health services functions to develop practical claims solutions for customers, and to support claims consultants with technical advice, including guidance on collecting medical evidence and the other requests of our customers.’
THE COVID-19 FACTOR
COVID-19 restrictions such as social distancing, self-isolation and lockdowns presented additional challenges for customers trying to collect evidence and documents to make a claim.
An Allianz spokesperson says the insurer simplified the way it processed hardship claims as a result of COVID-19, so that less documentation was required. ‘This enabled us to provide our customers with the support they needed in a timely manner, whether that was in the form of an excess waiver, deferred payment or payment plan.’
TAL brought in a broader range of options to help customers maintain their cover. This included premium waivers, cover pause options, increased flexibility around premium payments and allowing customers to reduce or change their level of cover with the option to re-increase their cover without further underwriting.
Homer says: ‘If our customers do miss payments, then we contact them in a range of ways to understand their circumstances, ensure they’re aware of our financial hardship support and help them keep their policies if they wish.’
TAL’s team has started to schedule income protection claim payments up to the next three months, where a customer’s medical condition or incapacity is likely to continue in the short term. ‘This ensures customers have confidence they will receive their benefits on time,’ says Homer.
Allianz is offering customers a policy health check to review their insurance and check it still meets their needs.
‘We have also developed a package of support measures to help our customers and suppliers at this time, in particular small businesses and those experiencing financial hardship as a result of the COVID-19 pandemic,’ says a spokesperson.
QBE similarly adopted bespoke approaches for financial hardship among its small to medium-sized enterprise (SME) and personal lines customers.
‘Early on in the pandemic, we initiated temporary relief options for our SME customers by maintaining expiring premiums, deferring premium payments, continuing coverage for vacant premises and accelerating cash settlements,’ says a spokesperson.
‘For our personal lines customers, we implemented a number of temporary support measures, including extended coverage for involuntary unemployment for customers who were stood down from their employment [rather than terminated].’
A CHANCE TO INNOVATE
Codes of conduct such as the General Insurance Code of Practice lay out expectations for how insurers should approach vulnerable customers — including those experiencing financial hardship.
Insurers will face further challenges this year, when hardship claims are examined through the lens of claims as a financial service, as well as new unfair contract terms (UCT) legislation.
The introduction of claims as a financial service means that those handling and settling insurance claims or potential claims require an Australian financial services licence (AFSL).
AFSL holders must have internal dispute resolution procedures in place and must belong to an Australian Securities and Investments Commission-approved external dispute resolution scheme. They must also confirm they have separate, urgent procedures to assess financial hardship claims.
Under the UCT provisions, insureds and beneficiaries of an insurance contract can complain to an insurer, who must deal with the dispute via its internal dispute process.
The General Insurance Code of Practice and the Life Insurance Code of Practice also provide consumer protections and outline exactly how an insurer must treat a complaint and the rights and responsibilities of each party.
Given the new legal context, it will be interesting to see whether claims teams will be able to go above and beyond the mandated requirements as some did in 2020.
For example, during the pandemic, QBE identified more than 520,000 eligible customers with private-use motor vehicles and provided them with e-gift cards worth A$25–A$50, with a total value of over A$20 million.
QBE also extended its employee wellbeing program to customers and broker partners, to offer support for those struggling to deal with the uncertainty of COVID-19 and other challenges.
Homer says TAL proactively made its wellbeing and career support services available to people impacted by the fallout from the pandemic.
Previously these services focused only on claimants. ‘The expanded wellbeing and career support services include three phone-based sessions with experts in wellness or career advice,’ he says.
Wellness and career support is in addition to increasing TAL’s grief support benefit for death benefits payable as a result of COVID-19. ‘The grief counselling support has doubled. Customers can be reimbursed for up to six counselling sessions to a maximum of $2,000,’ says Homer.
HANDLING THE CHALLENGES
Like most Australian businesses, insurers were also executing their own COVID-19 business responses, while supporting customers experiencing financial hardship and other crises. An Allianz spokesperson says: ‘Responding to the very fluid circumstances around COVID-19 was a challenge.’
TAL had to transition more than 2,000 staff to full-time working from home. It also temporarily redeployed 160 staff to assist with service and back-office processing, while launching new measures to provide additional support to TAL customers.
In the first five weeks of the pandemic, TAL experienced higher volumes in new business submissions and a surge of customer and adviser enquiries. It also experienced a strong uplift in demand for digital services, with a 31 per cent increase in traffic to digital self-serve platforms.
‘We have prioritised investment into these areas, so that we can meet these increasing demands,’ notes Homer.
THE ROAD AHEAD
Australia’s economic recovery started in late 2020. However, with JobKeeper falling away from April 2021, insurers were waiting to see if people had found their feet or if another wave of hardship claims was looming.
Either way, claims teams have the lessons and practices from 2020 to build on.
The QBE spokesperson says: ‘As hardship claims handling was embedded broadly across our business — with our frontline teams empowered to identify and respond to customers experiencing vulnerability during COVID-19 — this became almost business as usual, with many customers provided with premium relief support or having premiums waived or deferred where deemed necessary.’
Homer sums it up: ‘We anticipate the health and social impacts of COVID-19 will be with us for some time, and we are ready to support our partners and customers now and into the future.’
FINANCIAL HARDSHIP AND NEW REGULATIONS
What should insurers be aware of in the context of hardship claims and new regulations such as claims as a financial service and the unfair contract terms ruling?
According to the Insurance Council of Australia (ICA), insurers are currently in the process of implementing these reforms, most of which don’t start until later this year.
An ICA spokesperson says the Australian Securities and Investments Commission will soon begin regulating claims handling as a financial service.
‘The legislation will require insurers to handle all claims “honestly, efficiently and fairly”, including any emergency payments to provide relief from financial hardship.’
GI CODE OF PRACTICE: UPDATE ON VULNERABLE CUSTOMERS
The General Insurance Code of Practice stipulates that insurers must have processes in place to identify and support vulnerable customers, including those experiencing financial hardship. So, how are insurers performing?
‘In recognition of the unprecedented impact of the pandemic on insurers and customers, insurers focused their resources on helping customers experiencing financial hardship, vulnerability and family violence,’ says a spokesperson from the Insurance Council of Australia.
‘Insurers fast-tracked their code commitments to support vulnerable customers, including those experiencing financial hardship, by bringing forward by six months [to 1 July 2020] or earlier where possible, the key consumer provisions in parts 9 (Supporting customers experiencing vulnerability) and 10 (Financial hardship) of the new Code.
‘The Code Governance Committee [CGC] has produced an assessment on compliance with one of the aspects of the new Code, having a family violence policy in place by 1 July 2020. This showed a high level of compliance.’
Parts 9 and 10 of the Code became fully operational on 1 January 2021, and the CGC flagged in its annual report that it would be testing compliance with a focused inquiry. The results are expected in the second half of 2021.
GI Code of Practice: update on vulnerable customers
The General Insurance Code of Practice stipulates that insurers must have processes in place to identify and support vulnerable customers, including those experiencing financial hardship. So, how are insurers performing?
‘In recognition of the unprecedented impact of the pandemic on insurers and customers, insurers focused their resources on helping customers experiencing financial hardship, vulnerability and family violence,’ says a spokesperson from the Insurance Council of Australia.
‘Insurers fast-tracked their code commitments to support vulnerable customers, including those experiencing financial hardship, by bringing forward by six months [to 1 July 2020] or earlier where possible, the key consumer provisions in parts 9 (Supporting customers experiencing vulnerability) and 10 (Financial hardship) of the new Code.
‘The Code Governance Committee [CGC] has produced an assessment on compliance with one of the aspects of the new Code, having a family violence policy in place by 1 July 2020. This showed a high level of compliance.’
Parts 9 and 10 of the Code became fully operational on 1 January 2021, and the CGC flagged in its annual report that it would be testing compliance with a focused inquiry. The results are expected in the second half of 2021.GI Code of Practice: update on vulnerable customers
The General Insurance Code of Practice stipulates that insurers must have processes in place to identify and support vulnerable customers, including those experiencing financial hardship. So, how are insurers performing?
‘In recognition of the unprecedented impact of the pandemic on insurers and customers, insurers focused their resources on helping customers experiencing financial hardship, vulnerability and family violence,’ says a spokesperson from the Insurance Council of Australia.
‘Insurers fast-tracked their code commitments to support vulnerable customers, including those experiencing financial hardship, by bringing forward by six months [to 1 July 2020] or earlier where possible, the key consumer provisions in parts 9 (Supporting customers experiencing vulnerability) and 10 (Financial hardship) of the new Code.
‘The Code Governance Committee [CGC] has produced an assessment on compliance with one of the aspects of the new Code, having a family violence policy in place by 1 July 2020. This showed a high level of compliance.’
Parts 9 and 10 of the Code became fully operational on 1 January 2021, and the CGC flagged in its annual report that it would be testing compliance with a focused inquiry. The results are expected in the second half of 2021.
Comments
Remove Comment
Are you sure you want to delete your comment?
This cannot be undone.