The Banking Royal Commission has been closely followed and attracted heavy media attention since it was established in December 2017. Now turning its spotlight onto misconduct in the insurance industry, the Royal Commission is predicted to have some major impacts on the insurance industry as a whole. Some of these impacts include:
Stricter Regulation: ASIC (Australian Securities and Investments Commission) has come under scrutiny for the extent to which it has exercised its powers in the financial sector and this might suggest a more active regulatory environment in future. In corroboration, a report released by KPMG in August 2018 indicated increased regulation around the insurance industry was likely to occur.
Increased Premiums: As a result of the stricter regulations, a rise in premiums may occur, in part due to pressure from the Royal Commission. KPMG Partner in Actuarial & Financial Risk, Hoa Bui explains, “Compliance and remediation costs will increase in the shorter term, and companies will be expected to adapt their compliance operating models to manage costs effectively”.
Underwriting Discipline: A more intense focus on underwriting discipline may come to fruition as well as a tightening of the scope of policy coverage within the industry.
Class Actions: Following the Royal Commission, there is the potential for civil class actions, proceedings for civil penalties and criminal prosecutions. This means that considerable focus could be directed at cover for civil fines and penalties under professional indemnity, and directors' and officers' insurance policies. These actions might be brought against companies and individuals.
The Banking Royal Commission has uncovered misconduct across numerous sectors, and the impacts on the insurance industry alone will be significant. Stay tuned for future blogs that discuss the impact the Royal Commission has had on other sectors, where the findings have been just as ugly, if not worse.
