Opinion

We need to do more to deliver good customer outcomes. Confidence in our industry is at an all-time low.

You only need to open the paper and you can read about a stream of debatable business practices. 

And these claims are backed up by ICNZ’s own industry research, which shows trust is declining. 

It is disappointing to read and tough to hear consumers don’t trust us and think we’re not there to help them when they need it. It’s disappointing because I am sure none of us come into work to make things difficult. 

But it is clear that there is an issue and that we need to change. It would be easy for us to brush off these concerns by saying insurance is a grudge purchase or people just don’t want to understand. 

But at its heart, insurance is a vital community product and people do care. Insurance is fundamental to how communities work. 

It is a core part of the economic stability that allows them to thrive and to respond to disaster. It enables businesses to invest and grow by taking calculated risk. And it gives families the security they need to borrow money, to buy houses and cars, and to create homes and lifestyles. 

All of these people are comforted by the fact that their insurer will be there to help set things right when things go wrong. 

When you think about that as our collective industry purpose, those excuses of being “too hard”, or a grudge purchase don’t stack up. 

Customers should care about every aspect of their insurance, but we’ve conditioned them to think it’s all too hard. 

As an industry, we’ve put confusing discounts in place. We penalise people for making a claim by losing their no claims bonus. We incorporate complex jargon into our policies that even lawyers struggle to understand. 

It is up to us to change this. There is currently an asymmetry in transparency, information and knowledge. 

We expect customers to tell us everything and in return, we tell them the bare minimum. 

We design our processes to capture the 1% of insurance fraud, not to care for the 99% of legitimate customers. Decisions and changes are made that impact customers, but these are not communicated transparently. 

I know that Tower has been part of that problem, but we are committed to a better future. At Tower, we believe that people deserve better and are on a mission to break these industry norms and empower customers. 

I’ve challenged our team to deliver super simplicity and create a two-page policy with NO ifs or buts. 

This simplicity and transparency of product coverage makes insurance clear so that customers understand what they’re covered for, and there’s no confusion at claim time. 

It’s also why we went out publicly and committed to removing the duty of disclosure from our business. This is not just removing the question from our processes, it’s removing all of the implications of this question for customers. 

We’re being transparent about what we need to know, and when we need to know it, so that at claims time, customers who have been truthful, lawful and honest will simply have their claim paid. Not declined, withdrawn or some other technical rationalisation. 

As an industry we proudly go out and talk about the fact that we pay the vast majority of claims, and only a minute number are declined. And that may be technically true, but is that what customers think? Is that what they actually experience? 

At Tower, and I’d be surprised if it were different across the industry, one in five customers end up with what we call a withdrawn claim. 

So 20% of customers think there is some trick, some technical clause, or a reason they don’t really understand about why we can avoid paying their claim. It is no wonder that confidence is at an all-time low. 

But creating those simple, plain-language product wordings and removing catch-all questions is our way to break this industry norm. 

It’s also why we’ve just completed a $47 million investment into a new insurance technology platform. 

Digital is the way of the future, and our new platform is completely unique in the New Zealand market, removing complexity internally, and for customers. 

It transparently offers up all the information customers need to make an informed decision, without any hard-sell tactics. We are now moving our customers from over 400 legacy products to a core set of just 12 plain-language policies without the duty of disclosure. 

And we’ll be continuously reviewing and improving our products so that every year, when a customer renews, they’ll be on the latest policy we offer, with any changes clearly and transparently communicated. 

We’re removing sales incentives, improving and automating our claims processes, and as we convert our customers to our new platform, we remove all admin and finance fees. 

Transparency is key and is why we led the way on risk-based pricing. We believe risk-based pricing is fairer and we realised that it was going to be tough for a handful of customers, so we did the right thing – we were transparent. 

Before we made the change we spoke with the Government, with media and our customers. We communicated openly and spent time and effort explaining our rationale and supporting customers through the change. 

And interestingly, recent research we conducted shows that 70% of people think risk-based pricing is fair. It is a fairer model because it stops cross-subsidisation, it means that the small number of people who are most exposed pay the true cost of the risk they face, and it helps people understand and learn about risk. 

It all comes back to our purpose and enabling communities to prosper by taking calculated risk 

We ignited a much-needed national conversation around risk management. 

Risk-based pricing is not new. It is how insurance operates all around the world and what happens every time a customer in New Zealand buys car insurance. 

So why then, when this is a fairer way forward and a mature conversation and customer education was needed, did the industry shut its doors and duck for cover? 

Instead, embargoes remain in place and customers are confused and unnecessarily concerned about the availability of insurance. 

Is it any wonder that Kiwis don’t trust their insurers and we’ve all been asked to look at the culture and conduct of our businesses? 

There is a need for a mature and open conversation. The conversation is not about pricing, it is about risk and how we manage and prepare for it as a country. 

New Zealand is a small economy. It is one of the riskiest seismic countries in the world and storms are increasing across the Pacific, with rising water temperatures in the Tasman Sea increasing their impact here. 

There is a need for a mature open and honest conversation about these issues with all stakeholders, insurers, Government and community talking openly and honestly about this. 

Government is currently looking at stop-gap measures that do nothing to educate, mitigate and improve preparedness. If we continue down this path, it will leave issues that future generations will need to deal with and unwind. 

We have the data, information and experience to help educate and inform the community and Government on risk. Mature conversations and sharing our knowledge is part of our core purpose and our role as an insurance industry. 

It will help us rebuild trust in our industry and create a sustainable future for insurance. In the wake of the FMA and RBNZ report on life insurer conduct and culture it is clear there is a lot to do. There are other areas where we need to have a mature, transparent conversations. 

If you apply the conduct and culture, lens not just to the private sector, but across the agencies responsible for responding to the Canterbury Earthquakes, you will see failings that remain unresolved today. The old EQC model and how these claims were handled have done nothing to improve the perception of insurance in New Zealand. 

While we have made significant progress since then, it has been a long road for customers, insurers and the community and we have long maintained that the current system is fundamentally broken. 

In the true spirit of conduct and culture, and delivering good customer outcomes, I challenge the Government and the EQC to join the industry in and open, honest and transparent conversation on the right model for the EQC. 

This requires us all to step back from a position of defending the past and to look at outcomes from a customer perspective. We need to work together to ensure a sustainable, customer-focused solution is in place, so mistakes of the past are not repeated and the community is prepared. 

We know we’ve been part of the problem before. We have made some progress, but there remains a lot yet to do. We are fully committed to improving and being part of an industry that is trusted to deliver good outcomes for customers. 



Dec 2019

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