Inquiry time… again
“If I have my way, one of the first jobs for a Senate committee will be to look closely at the practices of the whole Australian insurance industry.”
So said Senator Jacqui Lambie in June after accusing general insurers of letting down Tasmanians following serious floods.
She has had to wait a while, but she will have her way within the next seven months.
Following a push by fellow senator Nick Xenophon for a government-run home and motor insurance comparator, the Senate has agreed to refer an inquiry on general insurance to the Economics References Committee, to report by June 22.
The terms of reference set out a range of topics to be investigated, including the proposed comparator.
More broadly, the inquiry will also probe premium increases over the past decade, plus competition and transparency.
Considering the aggressive undertones, the Australian insurance industry’s response has been remarkably muted.
Major insurers have declined to comment, referring insuranceNEWS.com.au to the Insurance Council of Australia (ICA).
IAG, however, has told insuranceNEWS.com.au it questions the value of a comparator and the way it is being pursued.
“There are a number of inquiries examining the financial services and general insurance industry running in parallel, so the question should be asked, do we need yet another inquiry?” a spokesman said.
“Clearly there is competition with new players entering the market in the last five years.
“The Australian Securities and Investments Commission and the Financial Conduct Authority in the UK have raised concerns with comparison sites in the past.
“The concerns have been about misleading or insufficient information being provided and reducing the decision to purchase insurance to a discussion simply around price instead of customers having the policy coverage that suits their needs.”
ICA’s response is similar, encapsulated in a single – albeit extremely long – sentence.
“The Insurance Council of Australia will co-operate with the Senate Economics References Committee inquiry into general insurance, as it has with previous inquiries, including the Financial System Inquiry, Competition Policy Review, Natural Disaster Insurance Review, Northern Australia Insurance Premiums Taskforce, three Australian Government Actuary investigations into insurance premiums in north Queensland, and multiple Productivity Commission reports into such issues as natural disaster funding arrangements, barriers to effective climate change adaptation, and data availability and use.”
Reading between the lines, the disgust and disappointment come through loud and clear.
The sheer number of inquiries the general insurance industry has faced in recent years is staggering.
And now we have another one, which many see as nothing more than an ill-considered response to problems that don’t exist, fuelled by community misconceptions and self-serving mainstream media campaigns.
News Corp’s promotion of the latest One Big Switch insurance campaign is seen by many as a driving force behind the inquiry.
One Big Switch aims to sign up thousands of consumers and then negotiate a mass policy discount on their behalf. Both it and News Corp will be paid commissions. News Corp is not backward in using its newspapers to promote awareness of issues it has an interest in, for whatever underlying reason. As the recent memoirs of its former editor-in-chief have revealed, the relationship between the publisher and politicians is remarkably close.
ICA, on behalf of the industry, has previously made clear its opposition to a government comparator, saying such an initiative would only encourage a focus on price over coverage.
And it disputes the view that premiums are out of control.
It says home building premiums have been static for more than two years, contents premiums have fallen over the past three, and motor premiums have “barely moved” in the past four years.
National Insurance Brokers Association (NIBA) CEO Dallas Booth says the inquiry is another case of badly conceived public policy.
“There are too many examples of somebody having a ‘good idea’ and it developing momentum in the community and the media,” he told insuranceNEWS.com.au.
“Good public policy has to start with a clear articulation of what the problem is, then a series of steps to resolve it. We are struggling here at NIBA because those two things are missing from most of the policy debates we’ve been involved with over the past few years.”
Mr Booth accepts the industry has its problems, but he says neither this inquiry nor a comparator will provide the answers.
“For example, the provision of information to consumers through the product disclosure statement process clearly doesn’t work.
“It would be far better to address that than have an inquiry on a comparator.”
Mr Booth is strongly critical of the News Corp/One Big Switch arrangement.
“I’m really uncomfortable with it,” he said. “It means we can’t get our points across to mainstream media because they have a financial interest.”
He believes the inquiry could have one positive advantage – a chance to put the insurance industry’s points across.
“My experience is that the community generally has misconceptions about how the general insurance industry operates, its level of profitability and the amount of competition,” Mr Booth says. “In one sense I take this as an opportunity to explain to senators and the broader public what’s been happening.
“We constantly need to explain the role and value that brokers provide, and we will do that.”
Submissions can be made before February 10 – and the insurance industry intends to be well represented.
Senator Lambie may have got her way in this, but whether the inquiry solves any of the industry’s problems is another matter entirely.