Survey shows insurers need to up their game
The Reserve Bank today published a report on compliance by insurers with the requirements to disclose their financial strength ratings and solvency information.
A recent survey by the Reserve Bank of a sample of 36 of the 89 licensed insurers found that the overall level of compliance with disclosure rules was well short of minimum requirements, with 53 percent of respondents complying at a low or poor level, and only 22 percent performing relatively well but with room to improve further. Only three insurers demonstrated an excellent level of compliance.
Reserve Bank Deputy Governor Grant Spencer said “While we can’t necessarily extrapolate these results to all insurers, the results were very disappointing. Compliance with disclosure obligations needs to improve”.
The survey should not be read as indicating underlying viability issues. The report shows that the most common issues found were: insurers not meeting their legal requirements to disclose the financial strength rating in writing prior to policyholders entering into and/or renewing a contract of insurance; solvency disclosure in financial statements being incomplete or incorrect; and website disclosures being incorrect, incomplete or not updated within the required timeframe.
“Compliance with disclosure requirements is a key component of the Reserve Bank’s prudential framework, which emphasises market discipline in addition to regulatory and self-discipline,” Mr Spencer said.
Insurers have been told to improve and those who rated poor and low must report back to the Reserve Bank on improvements made. The Reserve Bank will undertake further assessment of compliance with disclosure obligations.
“We need to see a marked improvement in compliance across the industry, and with some urgency,” Mr Spencer said.
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