I’ve worked for insurance companies for the last 15 years, up until about three months ago. That’s enough time, I thought, to develop a solid understanding of insurance in Australia.
How wrong I was. It turns out that what we think is strongly influenced, both consciously and unconsciously, by our perspective. Who knew?
I now work for Good Shepherd Microfinance, a not-for-profit organisation whose purpose is to enable economic wellbeing for people on low incomes, especially women and girls. Part of my role is to work on our ‘Good Insurance’ program.
After 10 weeks in the job, here are a couple of things I didn’t know about insurance in Australia:
- almost 20 per cent of adult Australians don’t have insurance for their car, home or contents (basic general insurance)[i]
- the causal factors for this include affordability, lack of trust, lack of access and lack of understanding.
Australia’s two largest general insurers, Suncorp and IAG, have worked hard with Good Shepherd Microfinance over the last two years to create innovative products and distribution strategies that directly target those causal factors. I don’t say eliminate – there is plenty more to do – but I do say they’ve been very effective in reducing those barriers to entry. It’s a good news story!
Having said that – here are some observations about those causal factors:
This term is relative for all of us, but absolute for some of us: few will choose insurance over feeding their children. Poverty in our society exists (as re-confirmed by the ACOSS Poverty in Australia report 2016 published in October), and it’s a topic I’ll reserve for a future article. But let’s think for a moment about affordability in relative terms.
If 20 per cent of us don’t have general insurance, that may be a commentary on our economic system and our society – but it’s also a great business opportunity. Insurance is fundamentally about accepting risk at a price – and the Good Insurance program has demonstrated that affordability can be improved by thinking about pricing risk in a different way.
Lack of Trust
In Australia, if you’ve never heard a story at the pub about a bad insurance experience, I suspect you’ve never been to the pub. I know for a fact that these stories – and yes, there are some bad ones – absolutely do not represent the vast bulk of people’s experiences with insurance companies. I know for a fact that the people who work at insurance companies are honest, hard-working folk who genuinely want to help. And I know for a fact that the industry is very highly and effectively regulated, to further protect us all. (If the need for regulation makes you cynical, ask yourself if you think meat inspectors are a bad idea[ii] – and then celebrate the complexity of the human condition.)
But bad news travels fast, and of course there is work to be done to improve trust between customers and insurers – along with other corporations of every stripe. Another great opportunity to access that untapped 20 per cent.
Lack of Access
Access and affordability are two very different things. Through the Good Insurance program we know that access improves by making payments fortnightly or weekly, instead of monthly or annually. We know that access improves if the option is given to pay premiums through CentrePay. We know that access improves if people’s awareness of a product is raised, for example through community networks. And we suspect that access improves through other simple expedients, such as search engine optimisation. Again, there is more to be done.
Lack of Understanding
After 15 years, I probably have a greater understanding of risk and insurance than Joe and Jane public. On the other hand I don’t understand Formula 1 racing, and one of the consequences is I don’t buy tickets to the race. But the trouble with not understanding insurance – and therefore not buying it – is that if something happens your life can change forever, and not in a good way. Insurance doesn’t stop things from happening – but it can give you the ability to recover and move on.
The issue of ‘understanding’ reminds me of a simple model of communication I encountered in a university unit once upon a time: in order to communicate successfully, information must first be sent; but it must also be received. Corporations, including insurers, tend to be sensationally good at sending information – but at the end of the day, how much of it is actually received? The opportunity to innovate on this problem is immense.
It’s enormously energising to jump on a learning curve, and to have the opportunity to consider new challenges. My overall perspective on insurance hasn’t changed – it gives us a chance to be resilient to life’s shocks, and I believe it’s a powerful force for good. But I also believe we can do better than 80:20 – and I’m looking forward to working with industry, governments and the community to see what else we can do together to achieve this.
by Mark Morand
Innovation Lead, Good Shepherd Microfinance
[i] Measuring Financial Exclusion in Australia, Centre For Social Impact & NAB, 2014
[ii] With due credit to Barack Obama, who made this point in a discussion of the health insurance industry in the US.