Insights / November 16th, 2017

APRA and ASIC release life insurance data

In the context of growing community concern about insurance claims handling, ASIC’s 2016 review of life insurance claims handling (REP 498) identified that there was a need for higher quality, more consistent and more transparent data from the industry. ASIC found that there were significant issues with data comparability and quality due to inconsistencies in interpretation of key performance metrics across different insurance companies.

ASIC concluded that poor data made it difficult to draw meaningful comparisons between insurance companies’ claims handling performance. Moreover, the quality of data made it difficult for insurance companies to assess their own performance, and very difficult for stakeholders and consumers to assess claims outcomes and performance.

In May 2017, APRA released a discussion paper, Towards a transparent public reporting regime for life insurance claims information, which outlined the agencies’ joint proposals for a public reporting regime.

Ultimately, the agencies intend to publish entity-level data on insurance claims handling, payment and disputes. This is intended to create a more transparent market and facilitate an informed public discussion about the performance of the life insurance industry. Consumers will also be able to make meaningful comparisons between insurance companies’ claims handling and payment performance.

The agencies consider that transparency will help build public trust and confidence in the life insurance industry and allow stakeholders to hold insurers to account. On the insurer side, APRA considers that a reporting regime will increase competition between insurers and increase the efficiency of claims handling.

However, data collection is not yet standardised across the industry and is of insufficient quality to present at an entity level. The path towards implementing the reporting regime will therefore take place in two phases, with Phase 1 currently in progress. Phase 1 is a pilot test of industry-level data collection and will allow industry and the agencies to analyse and improve the data collection process, while Phase 2 represents formal data collection and publication at entity level.

In Round 1 of Phase 1, the agencies collected data from 16 insurers on death, total permanent disability, trauma and income protection insurance claims. The data showed that in the 2016 calendar year (to the nearest hundred):

  • 126,300 claims were reported;
  • 6,400 claims were withdrawn;
  • 16,800 were undetermined at the end of 2016;
  • 103,100 claims were finalised during 2016; and
  • of those finalised claims, 95,000 (92.1%) were admitted and 8,100 (7.9%) were declined.

Data also showed that approximately 4,400 disputes were lodged in 2016, which represents 3.5% of reported claims.

The Information Paper highlights that the agencies expect a certain number of declined and withdrawn claims as there are legitimate reasons for declining a claim, such as where a claim falls outside the terms of the policy. Similarly, many claims will be withdrawn by the customer when it becomes apparent that the claim will be outside the scope of the policy.

A second round of data collection covering January-June 2017 will begin shortly, with the agencies to contact insurers. This will be followed by further discussion and may be followed by further rounds of data collection before the formal reporting regime is implemented. There will be incremental refinements to the data collection process, with a comprehensive public reporting regime on the horizon.

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