Insurance firms ‘unprepared’ for year 2000 claims

New Zealand insurance companies seem unprepared for claims arising from systems failing because of the year 2000 coding glitch. The responses of several of the larger insurance companies Computerworld spoke to ranged from confusion to indifference, echoing a recent industry survey. The problem, says one broker who has studied the issue, is that the insurance companies are looking at it as a problem that will take place in the year 2000, as opposed to a problem that needs to be solved by the year 2000.

New Zealand insurance companies seem unprepared for claims arising from systems failing because of the year 2000 coding glitch.

The responses of several of the larger insurance companies Computerworld spoke to ranged from confusion to indifference, echoing a recent industry survey.

Sun Alliance has no apparent policy or awareness regarding this issue. A spokesperson for the company said that it had been mentioned, but that was all they knew. The Insurance Council of New Zealand didn’t respond to Computerworld’s inquiry, nor did AMP. Prudential “is aware of the problem,” says spokesperson Desiree Keowan. Keowan goes on to say that “It is extremely unlikely that it is something that would bother us or our clients, because the majority of our business is life insurance and income protection.”

Even if other insurers are aware of year 2000 issues, an alternative response could be a blanket ban on claims, says Roger Fitzgerald of Pacific Insurance Brokers, who recently conducted a study into the implications of the year 2000 on the insurance industry.

Fitzgerald has examined the potential insurance problems faced by both insurer and client, and has met with a similar response to Computerworld.

The problem, says Fitzgerald, is that the insurance companies are looking at it as a problem that will take place in the year 2000, as opposed to a problem that needs to be solved by the year 2000.

Says Fitzgerald “The underwriters have a very simplistic approach to the problem, in that they’ll maybe stick in an extra question on the forms asking whether the client has done anything to fix things up, and if you haven’t then it’s excluded, so they’ll try to avoid it obviously.”

Of course there is the possibility that some companies will view this as an opportunity and offer limited year 2000 coverage, but the problem with this is that the premiums for such a scheme will be high, and their ability to provide coverage is limited by the capacity they have to pay out.

Other than that, the options are limited. In fact, says Fitzgerald, there will a blanket ban on any millennium claims. This is not a question of if but when. “As soon as one of the companies gets stung you can be sure they’ll all be changing their policy readings, and their questionnaires, to make sure that they don’t get hit,” says Fitzgerald.

The solution should therefore be reasonably obvious; the plan can’t be to rely on insurance, the plan must be to solve the problem.

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