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Promises, promises: what can industry expect from new government?

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As Labor’s Anthony Albanese was sworn in as Australia’s 31st Prime Minister, insurance professionals might have been wondering what the change of government means for the industry.

In the run-up to the election, asked the two major parties a series of questions. While the Coalition declined to participate, arguing that they’d said all they wanted to say already, Labor provided fulsome answers.

We’ve published some of these before – but not all – and given how things turned out, they’re worth now revisiting in full.

Answers were provided at the end of March by then Shadow Assistant Minister for Financial Services Matt Thistlethwaite.

The cyclone reinsurance pool has been broadly welcomed by the insurance industry, but scepticism remains about the level of predicted premium savings. How important is it for the government to explain how these figures were calculated? Do you think the scheme will work, and would Labor do anything differently?

Labor will continue to work constructively on a reinsurance pool to help ease the burden of home insurance costs in Northern Australia.

Labor, along with key stakeholders, is calling for more transparency around the key modelling and the price insurers will have to pay for reinsurance, as well as exactly how the reinsurance pool will benefit all locals in North Queensland.

The recent Senate Economics Legislation Committee hearing into the Cyclone and Flood Damage Reinsurance Pool found increasing uncertainty and confusion around the reinsurance pool because of a vacuum of vital public information.

Labor is also calling for a comprehensive plan that includes mitigation, retrofitting houses and a suite of measures to properly address the problem in a region that is prone to cyclones and natural disasters.

Many other Australians are facing unaffordable insurance premiums due to risks other than cyclone. Does Labor intend to help them in any way?

In the wake of the most recent flooding, the cost of flood insurance is going to go up and up and beyond the reach of many households, and small businesses.

There’s a clear justification, particularly based on what we've seen over the last couple of weeks, for the government to look to extend this scheme to cover flooding, and hopefully reduce those costs for consumers.

But we don’t want to hold up the establishment of the scheme. There are only two Senate sitting days left, so if extending it to flood would hold it up, we would rather see it pass and look to cover flood later after a thorough examination.

Rising premiums are caused in part by increasing frequency and severity of weather events, spurred on by the effects of climate change. Would Labor advocate a swifter retreat from fossil fuels, and swifter transition to net zero emissions, to help address a key underlying cause of unaffordable insurance premiums?

Labor has a stronger medium-term target for emissions reductions than the government.

We have announced our Powering Australian plan, with a medium term target of 43% reduction in emissions by 2030.

Powering Australia includes legislating for net zero emission by 2050, supporting new renewable energy ventures through our National Reconstruction Fund, upgrading the electricity grid and establishing a Powering the Regions Fund to promote new renewable ventures and help existing businesses increase energy efficiency.

We’ll cut taxes on electric vehicles and roll out 85 solar banks and 400 community batteries across the country.

Labor will also invest in disaster mitigation by establishing a Disaster Ready Fund that will invest $200 million a year in mitigation projects to help protect communities from the effects of extreme weather and reduce insurance risk.

Many insurance companies have pulled back on providing cover to companies involved in the fossil fuel industry. Does Labor have any concerns about this and does it have any plans to help the affected businesses?

Labor has adopted the Business Council of Australia’s (BCA) recommendation for facilities already covered by the Government’s Safeguard Mechanism that emissions be reduced gradually and predictably over time, to support international competitiveness and economic growth – consistent with industry’s own commitment to net zero by 2050.

The plan has been comprehensively modelled by Reputex and has been supported by the BCA, Australian Chamber of Commerce and Industry, the Australian Industry Group, the National Farmers’ Federation and the Australian Council of Trade Unions.

The Insurance Council has called for a commitment to increase Federal disaster resilience spending to $200 million per year. Why has Labor pledged to meet this demand?

Prevention projects including flood levees, sea walls, cyclone shelters and evacuation centres will assist with spiralling insurance premiums in disaster-prone regions, by reducing the risk of expensive damage to homes and businesses.

Labor will establish a $200 million a year Disaster Ready Fund to build the community infrastructure needed to reduce the risk of damage to communities due to extreme weather.

Too many homes continue to be built on flood plains or in other high risk areas. Will Labor carry out a national review of land planning arrangements as demanded by the Insurance Council? Will it also amend the National Construction Code to include building resilience as an objective?

Labor will have more to say on this in the coming weeks.

The pandemic caused confusion as to how insurance policies respond to business interruption, resulting in prolonged legal battles. Would Labor consider working with the insurance industry to design a scheme to provide cover in similar circumstances in future?

The Morrison-Joyce Government’s failure to act on the growing dysfunction in key insurance markets has left too many small and medium businesses exposed and jobs at risk.

The ICA’s Trowbridge report again put the focus on the lack of affordability or availability in some market segments for small businesses who need insurance cover to keep their businesses open and workers employed.

The Morrison-Joyce Government has been no friend of SMEs in Australia and has again left them to fend for themselves instead of addressing the affordability crisis in the insurance sector.

After a period of rapid reform, some in the industry have accused the government of “regulatory over-reach”. How does Labor respond to this, and would industry calls for time to adjust to the new regime be heeded under a Labor government?

Much of the new regulation in insurance relates to the findings in the Banking Royal Commission.

The Royal Commission was instituted because of systemic conflicts of interest, poor practices and bad products resulting in thousands of Australians being ripped off.

We don’t go out of our way to regulate industries, including insurance, but where there is proven bad behaviour and recommendations to act the Parliament is obliged to act.

Hopefully we now have a more transparent and accountable financial system that works in the interests of customers and reduces their risks.

Would Labor carry out a review of the impact of the Hayne-recommended reforms as requested by the Insurance Council? Will it commit to a minimum of two months consultation on any further reforms?

We understand there has been a lot of reform in financial services in recent years and we congratulate the industry for meeting this reform challenge.

There are still a few reforms that have not been delivered from the Royal Commission, such as the compensation scheme of last resort that we will seek to prioritise if elected. Labor will conduct proper consultation prior to any further reform in this sector.

State taxes on insurance are routinely criticised by reports and reviews. Would a Federal Labor government use its influence to help get these inefficient and unfair taxes removed?

We will work with the States to ensure the insurance system is as efficient and effective as possible.

What are your overall impressions of Australia’s general insurance industry, and what message do you have for industry leaders?

We generally have a strong insurance sector in Australia with good prudential standards and strong competition in most markets.

The industry has dealt with a lot of reform in short period of time pretty well and I have appreciated the feedback and consultation of the industry.

Markets are tight at the moment due to the increasing risks associated with climate change and the pandemic.

Labor does not seek to use climate change as a political weapon like the Morrison-Joyce government.

We see it as a problem that needs a solution and we look forward to working with the insurance industry to deliver that solution by reducing Australia’s emissions and protecting communities and households through mitigation.