Trends in the insurance sector
In this video, Partner Philip Hopley outlines the major issues facing the insurance sector and how we are helping clients address them. This includes a discussion of ASIC’s increased enforcement focus, APRA’s prudential regulatory objectives and the business challenges of the current economic environment.
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[Philip Hopley:] In terms of issues facing the insurance sector, I think that the single most significant issue in the last six months has been the increase in investigation and enforcement work by ASIC in the insurance product space.
It's now becoming clear they have a very particular view about how regimes, such as the unfair contract terms and design and distribution obligations regimes work in practice, and they are working with industry to try and achieve change there.
More broadly, and as has been the case for a few years now, the insurance sector as a whole is still finding profitability to be a challenge, and so they are continuing to work on simplification and digitalisation projects to reduce their costs.
In terms of the work that we are doing for clients, we've been doing a lot of legal compliance work, we've developed some really valuable insights into the problem areas, particularly those that ASIC considers to be problem areas, and we've been working with clients to help them achieve meaningful product and governance uplifts, and, more broadly, we are continuing to help clients do business, whether that's through scheme transfers of insurance businesses or through their commercial arrangements to allow them to simplify their businesses.
We've also been doing a lot of work with underwriting agencies and insurtech businesses to help them establish themselves or expand in the market.
In terms of what's ahead on the horizon, I think there'll continue to be (at least in the medium term) a focus on enforcement work by ASIC, which will ultimately drive uplifts across the sector.
So, I think that's probably the most important burning issue at the moment for many insurers. There'll continue to be, as there has been for some time, a focus on how to manage ESG risks and digital investment, and in terms of what keeps people up at night, well things like prudential regulation never sleeps.
Insurers have done a lot of work to implement the CPS 511 remuneration standards (that work is well advanced), but they'll now be looking forward to the implementation of the Financial Accountability Regime over the next 18 months, and then APRA has already flagged that it will be doing a wholesale review of its two most important prudential standards into risk and governance over the next year. So, there's that to look forward to as well.
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