The insurance industry has flagged increasing regulation, state taxes and affordability as issues it wants considered by the financial system inquiry.

In submissions that contain few surprises and even fewer flashes of inspiration, insurers say they want less regulation, brokers say they want consistency and consumer groups say they want action on affordability as well as a flood pool to subsidise premiums.

However, insurance issues are likely to occupy only a small part of the inquiry’s attention. Chairman and former banker David Murray has been directed to consider the impact of the global financial crisis on Australia’s financial system and is likely to focus on funding and stability in the banking system.

Mr Murray says a key issue will be the impact of regulation on competition, which has given insurers the opportunity to make submissions on regulatory creep and its effect on the cost of cover.

The Insurance Council of Australia (ICA) and IAG are among groups to complain about duplication between the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission.

IAG says it has needed to employ more compliance officers, invest more in staff development and training, prepare manuals for authorised representatives, develop incident reporting tools and enhance audit reporting. It estimates the cost of implementing financial services reform is $17-$20 million over two years.

ICA says the regulators should be able to co-ordinate their efforts to reduce overlaps.

The National Insurance Brokers Association (NIBA) argues more regulation will only increase premiums.

And Suncorp says increased prudential capital requirements have forced it to change its reinsurance structure and buy two additional reinstatements upfront that “are highly unlikely to ever be used”. This has cost $20 million, which is ultimately factored into premiums.

“The prescriptive nature of the regulation has also had the effect of removing the discretion of insurance companies to structure their reinsurance in a way that best suits their risk appetite and, as a result, is stifling innovation and efficiencies in the reinsurance market,” Suncorp says.

QBE says regulations should be harmonised and more consideration given to whether the benefits of more regulation outweigh the costs, plus the impact on affordability.

NIBA says brokers have been caught up in the Future of Financial Advice reforms aimed at financial advisers. It argues a “one-size-fits-all” regulatory approach leads to unintended consequences and forces groups to constantly make cases for exemption.

Company directors are concerned at the responsibilities the regulator is imposing on boards.

Macquarie Bank’s submission says requirements on boards have risen significantly, particularly for groups supervised by APRA.

“This places a rising burden on [them] but it also has the potential to blur the well-established division of responsibility between the board and management,” it says.

The crossing of lines between day-to-day operations and board oversight also concerns the Australian Institute of Company Directors, which says members increasingly complain about board time spent on “the red tape of regulation”.

It claims APRA’s requirements are the most demanding.

While insurers say affordability should be addressed through risk mitigation and not by artificially keeping premiums low, consumer groups argue for the recommendations of the National Disaster Insurance Review to be implemented, with a flood pool to subsidise premiums on high-risk homes.

Suncorp says a natural disaster pool would “blunt the insurance price signals” to consumers, government and the wider community and could lead to increased risk exposure.

It points to its own efforts in Queensland, where cover was withdrawn from flood-prone areas and reinstated when levees were built.

Suncorp recommends improved data collection and sharing between insurers, consumers and government and comprehensive national mitigation and resilience programs.

The industry continues its battle against state insurance taxes, arguing they encourage underinsurance and push disaster costs onto the taxpayer. QBE estimates state taxes add about $93 to each policy.

“Over-regulation at the federal and state levels is a major contributor to our comparatively high domestic cost structures, the burden made more costly and onerous in areas where there is no national consistency or alignment of regulatory regimes, such as in workers’ compensation, compulsory third party and certain liability legislation,” it says.

Mr Murray will give a speech on May 1 outlining insights from the first round of submissions to the inquiry, and intends to produce an interim report mid-year.

His speech will hopefully give the many parties making submissions over general insurance issues an indication as to whether the inquiry committee has paid them any attention. Or will the inquiry team follow the precedent of all previous financial services inquiries and compress comment on general insurance into a few vague paragraphs?