New product laws ‘could disrupt renewals’
Proposed laws aimed at preventing financial product mis-selling could require the re-collection of policy information at each renewal, adding millions of dollars to costs and raising premiums, the Insurance Council of Australia (ICA) has warned.
“Insurers should not have to ask underwriting questions again and re-collect information afresh from consumers, which is inefficient and likely to be a source of annoyance for consumers,” ICA Policy Regulation GM John Anning told the Senate Economics committee yesterday.
“Ultimately these costs will be reflected in higher premiums paid by consumers.”
ICA says a large insurer has estimated overhauling the renewal processes to re-collect information would cost about $62 million a year, on top of one-off system changes of about $14 million.
The committee has been holding public hearings in Melbourne this week on the proposed design and distribution obligations and product intervention powers bill. The inquiry is due to report by Friday next week.
ICA is pushing for a continuation of existing renewal practices, where customers are shown previous details on notices and given the option of notifying the insurer of changes.
Mr Anning says the process can be largely automated, reducing costs, while consumers are still able to speak to a person if they need to make changes.
“We accept the need to ensure that the product is still suitable for the insured. The question is how do you go about doing it,” Mr Anning said.
As previously reported by insuranceNEWS.com.au, ICA said in a written submission to the inquiry it was “deeply concerned” the bill would hinder rather than improve the likelihood that consumers would buy insurance suitable for their needs.
Mr Anning told the committee the bill as currently drafted leaves “substantial ambiguity” about how target market obligations are intended to apply to mass-market retail products such as home and motor insurance.
“There is no clarity in the bill as to how granular the target market determination needs to be,” he said.
“From our perspective, for simple general insurance products, an appropriate target market determination should be relatively simple and describe broad categories of consumers.”
A written submission from the National Insurance Brokers Association called for insurance to be excluded while impacts on the industry were considered.
“If implemented in the form proposed the changes are likely to result in increased insurance costs for consumers as well as less innovation, greater complexity and less competition,” it said.