Insurance companies worry about reputation in New Zealand

Customer expectations of insurance companies do no always match the reality of a global-scale disaster like the ...
ANDREW GORRIE/FAIRFAX NZ

Customer expectations of insurance companies do no always match the reality of a global-scale disaster like the Christchurch earthquakes, Insurance Council chief executive Tim Grafton says.

Christchurch's earthquakes have left many New Zealand insurers worried what customers think of them.

PWC has released the results of a survey asking insurers to identify the top 10 risks facing their industry.

Forty-three New Zealand insurance industry professionals responded.

Natural catastrophes took the number one spot, followed by change management and distribution channels.

But reputation came in at number five, compared to a ranking of 18th internationally.

One respondent said: "Social media, coupled with increasing premiums across the country, will spread [distrust] and make the industry more despised".

PWC insurance sector leader Karl Deutschle said the high ranking of reputational risk was due to the lingering effects of the Canterbury earthquakes. 

In the same survey in 2013, it was ranked as the number three risk.

"There are concerns around how consumers perceive the insurers' response to Christchurch particularly and natural catastrophes more broadly," Deutschle said.

Almost five years after the first Christchurch earthquake, more than 15 per cent of residential claims are still to be settled.

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The Insurance Council of New Zealand expects almost all to be resolved next year.

Deutschle said it had been a complex situation because of the number of different parties involved in dealing with Christchurch claims.

"It's not just one insurer dealing with one customer, there are the impacts of the Earthquake Commission and Government involvement in how things should work."

But he said claim events were crucial to insurers' reputations because they were the one time insurance customers could clearly see their insurers in action.

"Insurers have found it takes time to work through, but if you are a customer, you just want your money."

Insurance commentator Russell Hutchinson, of Chatswood Consulting, said: "There were loads of claims, loads of unhappy people".

"It was not all insurers' fault but they did not cover themselves in glory, either. There is a legitimate question to be asked about it.

"Lots of people complained about them, lots of people were unhappy. Some of it was real, some of it was not, but it is a reputational problem and they are damn well right to be worried," Hutchinson said.

Insurance Council chief executive Tim Grafton said it was a problem of customer expectations not matching up to the reality of a global-scale disaster. 

But he said the council's surveys showed that two-thirds of the public had a favourable view of the insurance industry, a figure that was only slightly lower in Christchurch.

Hutchinson said another factor that contributed to reputational risk in the New Zealand market was the dominance of Vero and IAG.

Vero owns also owns Autosure, while IAG owns State, AMI and NZI.

"The more you poke around it, especially the lack of competition and the concentration of companies, there is concern that the reputational problem might outlast the concerns over Christchurch."

Because of the number of retail brands Vero and IAG operate, Hutchinson said many consumers thought they were "shopping around" when they were switching back and forth from one big company to another.

Grafton said the industry was working to improve its reputation through measures such as the new Fair Insurance Code, which comes into force next year.

Despite a wide-ranging review of the Earthquake Commission, the survey showed New Zealand insurers were less worried about political interference in their industry than other insurers around the world.

TOP RISKS FOR NZ INSURERS

1. Natural catastrophes

2. Change management

3. Distribution channels

4. Cyber risk

5. Reputation

6. Human talent

7. Product development

8. Long tail liabilities

9. Quality of risk management

10. Social change

 - Stuff

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