The Australian financial services industry was rocked by regulatory scrutiny recently. How would the UK protection market stand up to a similar inquest?
In the UK, we often look to Australia as a comparable market and a leading light of modern industry practice. However, the Australian banking, superannuation and insurance industry was rocked to its core by the very public exposure of its culture and behaviours during the Royal Commission. Over the course of a year, it made for sensational daily headlines and compulsive TV viewing. Executive heads rolled and industry giants changed their practices overnight.
Published in February, the final 530-page report with 76 recommendations is really just the end of the beginning. On matters closer to protection, its scope covered the likes of commission, claims philosophy, mortgage brokers as advisers, fairness of disclosure, quality of advice and mental health practices. Don't they sound familiar?
We and Australia operate in a highly regulated world - rich with technical, financial and conduct rules and legislation. However, the commission measured industry culture, practices and behaviours against a far more incisive and deeper moral ‘community standard'. It questioned the true motivations of business culture at all levels - and held them to account. The industry fell embarrassingly short. Whilst there was talk of customer-centricity and fair treatment, too often these were painfully exposed as token lip-service. The industry claimed practices were based on good evidence: when examined deeper that evidence was found to be outdated, or on occasion, didn't exist at all.
Meanwhile, in the UK…
When I reflect on how this might translate to the UK, I wonder if we would fare any better if we were put under the public spotlight and judged by community standards. Have we learned and changed from the horror stories of the banking crisis? Pension mis-selling raises its head again and again, the PPI scandal drags on. When it comes to protection - are we genuinely and consistently doing the right things by our customers - as providers, reinsurers and advisers?
I like to believe that many of us ‘think' we are, and there have been some pivotal changes in our market such as the publishing of claim statistics and the move to offering support services at claim. However we are still slow to challenge the status quo. We have products and terms and conditions that many consumers struggle to understand. Consumers don't trust us to pay claims, despite the evidence to the contrary.
Rising to the mental health challenge
During the Royal Commission our treatment of mental health came under the spotlight. I was frustrated that our ‘go-to' tool is often to exclude this risk. I was fortunate to be able to work with lobby groups, mental health charities and hear first-hand how difficult it is for some customers to go through the underwriting process and secure cover for their condition.
One of the challenges levelled at the industry by these charity groups was that the industry was not contemporary in its approach to mental health. Community attitudes to insurance needs have been changing due to greater levels of awareness and acceptance of mental health conditions. Now is the time for us to challenge the traditional risk frameworks we have been applying for decades.
It has been encouraging to see the beginnings of a shift in practice, however these still result in exclusions of the condition. And despite the collaborative Access to Insurance programme and ABI's focus on developing new standards, very little is changing to the way we engage with our customers on mental health and in our underwriting… for now.
Steps in the right direction for those struggling with mental ill health
We can start by updating our knowledge and research of mental illness and ensure our evidence is contemporary. As an industry we should work together on this and across a number of agencies.
We need to review the questions we ask about mental health. They certainly aren't effective. I want us to remove unnecessary duplication and vague symptom vs diagnosis type questions. We need to understand more about how our customer is handling their condition - for example, are their immediate family aware, have they taken more time off work or changed jobs and are they socially active.
Mental health issues can often be event-based and temporary - I believe people should not be permanently defined by their diagnosis. At LV=, we already consider milder event-based episodes and accept them on standard rates. And, our innovative ‘automatic exclusion review' approach will soon celebrate its first birthday. We'll contact over 1,200 members and their advisers to check-in and remove temporary cover exclusions - over half of which are for mental health.
Extra services available through protection policies provide remote psychological support to our protection policyholders. Anxiety and worry can happen at any time - members don't need to make a claim - but now they can simply and quickly access confidential emotional support when they need to.
We're all familiar with the concept of fracture cover. Typically, such a benefit doesn't require a full claim, but in the event of a physical fracture/break, providers such as LV=, make a cash payout as a form of financial breathing space. I believe there's room for ‘emotional fracture' cover, with a combination of a cash payout and tailored support. Emotional life shocks (often involving those around us) can set us back temporarily. Rather than leaving them to muddle through and likely suffer longer term effects, I'd like to see how we could develop our propositions to do more help people in these common stressful situations.
So, back to ‘Banking Bad'. I believe we are already judged by community standards, every day by consumers and our customers. We need to change and respond to a world where periods of mental ill-health and inability to work may be the norm for our customers.
Debbie Kennedy, Managing Director of Protection at LV=
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