How insurance brokers handled a year plagued by extreme weather events and Covid-19

The independent committee that monitors the Insurance Brokers Code of Practice (the Code) has released the findings of an Own Motion Inquiry into how Code subscribers responded to 2020’s trials and whether they had strategies in place to address these and any future challenges. The findings include a series of recommendations for brokers when responding to such events.

This is a media release from the Insurance Brokers Code Compliance Committee. It was originally published on 5th April, 2022. 

A copy of the report can be accessed here.

The devastating extreme weather events across Australia and the COVID-19 pandemic’s effect on businesses – particularly in the retail, hospitality, entertainment and travel sectors – placed unprecedented demands on the insurance broking industry.

The inquiry by the Insurance Brokers Code Compliance Committee (the Committee) found that many Code subscribers had embraced their position as an intermediary between client and insurer, often going ‘above and beyond’ to get good outcomes for clients in 2020.

Assistance included contacting clients to see if they needed help, interpreting complex business interruption policies, helping to make claims, and liaising with insurers. Where clients were experiencing financial difficulty, brokers sought ways to tailor their policies to reduce costs, offer premium funding arrangements and discuss access to government assistance. For many brokers, cancelling a client’s policy was only considered once all other avenues had been exhausted.

The obligations of subscribers during challenging times are addressed by Service Standard 9 of the current 2014 Code: “We will respond to catastrophes and disasters in a timely, professional, practical and compassionate manner in conjunction with any industry-wide response” and by requirements outlined in Service Standard 5.

While the 2022 Code due to come into effect on 1 November 2022 does not have specific obligations related to extreme weather events, the Committee notes that new vulnerability obligations would apply to clients who have suffered significant detriment due to bushfire, flood or other extreme weather events. It expects subscribers to identify and support clients who experience vulnerability – in particular after such an event, and treat them with sensitivity, dignity, respect and compassion.

The inquiry was based on information from 427 responses to a questionnaire in the 2020 Annual Compliance Statement (ACS) and from follow-up video conferences with 46 Code subscribers. Subscribers were asked about the impact of COVID-19 and of extreme weather events that occurred from 2019 to 2020, including bushfires, storms, hail and flooding. The report noted that much of the impact and lessons from the pandemic also applied to extreme weather events, such as changes in work environments, issues with getting cover and delays in claims processing due to the volume of claims.

Each extreme weather event had also seen a change in the coverage brokers have been able to obtain for their clients – changes in reinsurance after extreme weather events result in changes to premiums and certain types of cover becoming harder to obtain.

As well as responding to a wide range of client needs, the events of 2020 presented numerous challenges for the broking industry itself, including workload issues, disruptions, continuity and the need to support and motivate staff working from home during the pandemic.

The inquiry found that brokers had demonstrated an understanding of the importance of having a resilient business, underpinned by a resilient workforce, when overcoming tough times. Almost two-thirds reported they had or were developing a resilience policy during 2020; others said they rely on other policies and procedures for managing unexpected challenges and disruptions. A number implemented support mechanisms for employees to improve wellbeing in this period.

In ‘Broking resilience: Lessons from COVID-19 and the 2019-20 extreme weather events’,the Committee presents a series of recommendations that include the need for effective communication and being proactive, as well as outlining ways insurance brokers can build resilient businesses able to support clients through all challenges. It encourages brokers to review and implement the recommendations where appropriate and to learn from the examples good practise shared throughout the report.

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