Key issues facing the insurance industry
Hall & Wilcox Partner Priya Paquet discusses the key issues impacting on Australia’s insurance industry, including significant weather events, a slowing economy, a backlog of recoveries claims, and the High Court ruling in two business interruption test cases.
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Some of the key issues we are seeing in the insurance industry relate to the significant weather events. There has been an impact on the industry from a claims perspective, firstly, in relation to meeting their compliance requirements under the General Insurance Code of Practice, but we've also seen a significant impact on the recoveries that insurers have been able to undertake. This has been due to the focus being on meeting compliance needs from a claims perspective, but also there's no focus on the recoveries at this point in time, which will likely lead to an increase in recoveries for the rest of the year. We're likely going to see even more claims come through if there are significant storm events. We've also seen, due to the significant number of claims that are already in play, the number of recoveries are likely to increase. The timeframes in responding to those recoveries have slowed down a lot. But I think we're going to see in the next six months those recoveries then increase when insurers start to catch up with the number of claims that they are seeing at the moment.
The industry thought that COVID-19 would have the biggest impact – that's because of the effect on business interruption claims. However, with the two test cases that have been heard and gone up to the High Court as well – the first test case dealing with the issues surrounding the Quarantine Act and its application to exclusions, and the second test case dealing with several definitions in policy wording where the courts actually set out definitions relating to nine different policies from nine different insurers. The Australian courts found in favour of insurers in most instances, which meant that the number of claims that were expected dropped significantly.
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