Insurers failing to innovate

• Tweet

Insurers are lagging behind the rest of the financial services sector in innovation and need to do more to keep pace with changes to New Zealand society, an industry figure says.

Monday, August 13th 2012, 4:55PM 3 Comments

by Niko Kloeten

Darrin Bull, Sovereign's senior manager risk and health product, spoke at last week's Australian and New Zealand Institute of Insurance and Finance Life Conference about the lack of big, game-changing innovations in the local insurance market.

He said innovation in New Zealand's life and health insurance market is dominated by small, incremental changes to products, with a particular obsession with benchmarks.

Living assurance in New Zealand covers 44 conditions and since May there have been five new releases in the market, he said.

"It's a bit like, ‘I see your angioplasty and raise you dementia," he said.  "We need to break out of this arms race."

Bull said Swiss Re approves of the current model of incremental changes because it makes it "easier" for the reinsurer.

"But in my view what it leads to is a failure of the market to step up to the challenges... I think the market needs a real dose of innovation."

He said the products insurers produce "no longer connect" with the health situations of most New Zealanders; for instance, each year one in five Kiwis experience a mental disorder.

"This is a major condition affecting the lives of New Zealanders and as an industry we need to find ways to deal with it."

Another issue insurers have been slow to react to, Bull said, has been changing demographics, with a growing proportion of the population of non-European ethnicity.

"The face of New Zealanders is changing and in many ways has already changed.  Most banks had migrant banking divisions 10 years ago."

He quoted author Clayton Christensen, who said one of the biggest barriers to innovation is good risk management and good management in general.

Along similar lines, he mentioned a UK survey that asked what the biggest barrier to innovation in insurers was.  The answer?

"Actuaries."

Niko Kloeten can be contacted at niko@goodreturns.co.nz

Comments from our readers

Add your comment: