Brands give illusion of competition, commission says
A proliferation of brands from a few providers is camouflaging a high insurance market concentration in Australia, according to a Productivity Commission draft report.
The four largest insurers – IAG, Suncorp, QBE and Allianz, have more than 30 brands between them, the commission says. In pet cover, identified as one of the weakest areas for competition, Hollard underwrites 20 of the 22 products available.
“The use of branding does create the illusion of more competitors than there actually are,” says the report, which recommends measures to improve transparency.
The commission says the section of a brand’s website that shows which insurer underwrites the product should include a list of other same-segment brands underwritten by that insurer. Insurers should also give a brands list to the Australian Securities and Investments Commission to publish.
The Productivity Commission also recommends showing previous-year premiums on renewal notices, along with percentage changes.
“The annual renewal point for insurance should act as a trigger point for reconsidering insurance providers, yet the complexity of product offerings and an overwhelming orientation to trusted brands induces inertia,” it says.
Add-on products and lenders’ mortgage insurance – another weak spot for competition – are identified as areas for further review, while the report proposes phasing out state and territory taxes on insurance from the middle of this year.
In broader recommendations, it says “general advice” as defined in the Corporations Act is misleading and should be renamed, with the term “advice” used only where personal circumstances are considered.
It says one regulator should be given a mandate to lead on matters related to competition in the financial system, providing a clearer focus than current arrangements.
Submissions on the draft document are due by March 20 and public hearings will be held in Sydney on February 28 and March 1, then in Melbourne on March 5 and 6.
The commission will deliver its final report in July.