International professional services firm KPMG has highlighted two specific challenges for the life insurance industry.
The challenges are outlined in KPMG’s “Life Insurance Insights” – an analysis of financial results over the 18-month period to 30 June 2019. They are:
1.Upcoming extension of Unfair Contracts legislation to insurers
These laws were designed to protect consumers and small businesses from unfairly one-sided standard-form contracts. Until now they have not applied to the insurance industry.
Life insurance companies will need to review their contracts in light of this legislation and determine if any terms may be deemed to be unfair in certain circumstances or at some time in the future – a difficult judgement to make, given that fairness is a relative concept and perceptions can change over time. More significantly, insurers may not be able to rely on terms, definitions and conditions in existing insurance policies which they are unable to change and upon which they have relied in determining product prices.
2.Increasing prevalence of mental health issues
Mental health was the number one cause for TPD claims in 2018, and it was the number two cause for disability income. A$750m ($509m) of all claims paid in the 2018 calendar year related to mental health.
The report, “The impact of psychosocial factors on mental health and their implications for Life insurance”, recently published by KPMG and the Financial Services Council explores the issue of mental health in the community and in insurance. The report notes an increasing potential for a range of social factors and individual psychological stresses to be diagnosed and treated as mental illness – often with detrimental impacts to recovery and a return to optimal wellbeing.
The insurance industry and health practitioners need to coordinate mental health care for an individual that tailors recovery plans, empowers people to recognise coping skills for positive mental health and improves their chance of returning to full health and a fulfilling life.