Government backs mitigation in premium taskforce response
The Federal Government says it will pursue reforms to place downward pressure on premiums through accountability and transparency, outlining the plans in a formal response to the Northern Australia Insurance Premiums Taskforce and this year’s Senate inquiry.
The taskforce released its final report publicly in March last year, while the Senate inquiry into the general insurance industry reported in August.
“The taskforce found that mitigation activities to reduce the risk of damage from cyclones are the only way to reduce premiums on a sustainable basis,” the response says.
“The government accepts this finding, and will not intervene directly in the insurance market.”
Instead, reforms will focus on increased accountability and transparency and improving consumer understanding of insurance, it says.
The response calls on the Insurance Council of Australia (ICA) to speed work on updating the industry code of practice, and says the government plans to extend unfair contract term provisions to insurance, with proposals to be released in early 2018.
It will task the Australian Securities and Investments Commission with developing options to improve consumer understanding of insurance products as part of a financial literacy strategy. The regulator will work with industry on providing guidance to consumers.
Treasury will also be asked to develop proposals to improve consumers’ understanding and access to information through better transparency and enhanced disclosure practices in the insurance sector.
The government says it has already acted on a number of recommendations in the taskforce report, including establishing a comparison website for North Queensland and funding an Australian Competition and Consumer Commission inquiry.
It urges WA, Queensland and the Northern Territory to abolish inefficient stamp duties, strata commissions and other levies on premiums.
“Tackling the problem of insurance affordability in northern Australia is a complex issue and requires action by all stakeholders, including state and territory governments, insurance companies and residents,” it says.
ICA spokesman Campbell Fuller says the industry is already well advanced on many of the key recommendations.
“This is a fair, balanced and reasonable response to the Northern Australia Insurance Premiums Taskforce,” he told insuranceNEWS.com.au.
Suncorp welcomed the government’s decision to rule out a reinsurance pool and a cyclone mutual as part of its response, but warned caution was needed when considering the extension of unfair contract term provisions to insurance.