The Senate Economics References Committee has released its report on the general insurance industry in Australia and called on the Government to increase mitigation spending and the industry to improve disclosure practices.
The inquiry was designed to review competition and transparency in the strata, home and car insurance markets in Australia with a focus on examining how the industry is performing in relation to product disclosure and comparability and how these could be improved.
The report noted 15 recommendations, with the first a call on the Government to release its long-awaited response to the final report of the Northern Australia Insurance Premiums Taskforce. The final recommendation states that the Government should, “as a matter of urgency,” work with states and territories to reform natural disaster funding arrangements.
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Dallas Booth,
NIBA CEO, told
Insurance Business that the review of the industry “did not find any major problems with general insurance in Australia” but the report could strengthen the case for seeking insurance advice from a broker.
“This is the trouble with a lot of these bodies where they identify issues and concerns and a lot of problems in insurance would be resolved if more people got good advice on things,” Booth said.
“All products are not the same, all risks are not the same and therefore it is a challenge and can be a challenge for people to get the cover they need. If you don’t know what you are doing you’ve got to get advice and sometimes Government agencies, parliamentary committees, regulators tend not to recommend people to get advice. I don’t understand why that is the case.”
The report also recommends that the Government “strongly consider” introducing legislation to require all insurance intermediaries to disclose component pricing, including commissions payable to strata managers, on strata insurance quotations.
Booth noted that brokers are already “totally upfront and honest” about their commissions and said the rest of those involved in the industry could follow suit.
“We do have a concern of strata managers effectively getting insurance commissions when they are not trained, and they are not experts or experienced in the world of insurance for strata risks and quite a lot of them are pocketing the insurance commission,” Booth said. “There is a massive question mark as to whether corporates are being well served through that process.”
On the issue of a price comparison service for consumers to compare insurance policies, the report recommends that the Government complete a “detailed proposal” for the service.
Rob Whelan, CEO of the
Insurance Council of Australia (ICA), questioned the push towards a price comparison service as evidence from consumer groups, regulators and the industry shows that comparison sites do not empower customers to choose the best product.
“You can’t compare insurance products as though you’re comparing cans of soft drink, and each insurer’s product is competitive on its features as well as its price,” Whelan said. “The ICA notes the recommendation relating to a price comparison tool but believes enough evidence has already been provided to demonstrate a government-run aggregator would not stand up to a cost-benefit analysis.”
The report notes the work undertaken by the ICA to improve product disclosure practices but said that it is “deeply concerned by the apparent lack of transparency in the general insurance industry.”
Whelan said that many of the issues raised by the report are already being addressed by the industry, such as the Disclosure Taskforce and the review of the general insurance code of practice.
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