Tower to stop asking: Anything else we should know?

Tuesday, 9 July 2019

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Insurer Tower is reducing the disclosure obligations it puts on its customers.

But one insurance expert says it's simply jumping before it is pushed.

Tower chief executive Richard Harding said it had decided to remove the duty of disclosure from its sales and claims processes before the end of the year.

At present, insurance customers have a requirement to disclose any information the insurer might deem material. If they do not, the insurer can turn down a claim because of it.

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Richard Harding chief executive of Tower, said one of customers' biggest concerns was whether their claims would be accepted.

But it causes problems because they do not always remember, or understand what might be important to an insurer.

Harding said, instead, if customers answered all the questions Tower asked truthfully, they could assume they had disclosed everything that was required.

'We've been told one of the things that concerns people the most is not knowing for certain if their claim will be accepted and paid,' he said.

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'It comes back to the tricky, catch-all question that insurers can ask when you buy insurance, along the lines of 'is there anything else that we should know?' which means that if customers unwittingly leave something out, they can be disappointed when it comes time to making a claim.

'Because of these concerns, we've started removing this question from our systems, processes and policies, and by the end of the year, people who buy home, contents or car insurance from Tower will no longer be asked this question.'

Insurance law specialist Crossley Gates, a partner at Keegan Alexander, said Tower's move was likely to be required across the industry before long.

The Government is conducting a review of insurance contracts law, and has flagged the issue of disclosure as a problem for consumers.

One of its preferred solutions is to require insurers to ask an exhaustive list of questions to get all the information required from consumers – as Tower is proposing.

'[Tower is] adapting voluntarily now to what is likely to be the law a year or two away.'

He said it was still likely to put some pressure on other insurers to move, and could give it a marketing advantage.

Tower has been the subject of attention in the insurance industry because it has moved to risk-based pricing for its domestic insurance policies.

That means people in higher-risk areas, such as those prone to earthquakes, pay more for their policies.

Insurance commentator Michael Naylor, of Massey University, said clients would still not be able to withhold information or lie on their applications.

'Tower, of course, is desperate to increase market share, so their move is understandable. IAG/Suncorp could potentially lose market share, but probably not that much. Thus, I can see the other insurers being cautious and not following until they can ascertain the possible financial consequences .'