The Australian Securities and Investments Commission (ASIC) has supported clearly linking mitigation steps by householders with premium reductions to address affordability issues in the nation’s north.

The regulator also says insurers should provide sum insured estimates for consumers.

The proposals reflect recommendations in the Australian Competition and Consumer Commission (ACCC) Northern Australia Insurance inquiry interim report, which ASIC says offers a number of measures that have the potential for significant positive impacts for consumers.

“We would welcome the ACCC formally recommending them to the Government,” it says in a submission.

ASIC warns that simply improving disclosure is not enough. It also urges the inquiry to take into account proposed Hayne royal commission reforms and new design and distribution obligations.

“Disclosure should be complemented by the development and use of more effective regulatory tools,” ASIC says.

The regulator says greater clarity around mitigation and pricing impacts would benefit both consumers and underwriters, and suggests insurers should establish a mechanism so homeowners who take action are rewarded with pre-determined price reductions.

“Such a mechanism would help to make insurance more affordable for some consumers, particularly in areas where affordability has proven challenging, such as in northern Australia,” it says.

“Reducing risks through consumer-initiated mitigation measures would also benefit general insurers by reducing their risk exposures.”

Providing sum insured figures, instead of having consumers rely on online calculators, would help address underinsurance, and insurers could explain variations between estimates from other providers, it says.

ASIC agrees consumers should have more control over how claims are settled, including the right to choose between cash settlement or a rebuild by the insurer.

It also supports consumer research on a national home insurance comparison website, suggesting greater use of standard cover and terms would help comparability.

The use of comparison websites has been rejected by major insurers over the past decade, and IAG says in its submission that estimating sums insured for customers would not be likely to reduce unintended underinsurance. The giant insurer is also concerned the proposal could trigger personal financial product advice obligations.

IAG says proposals to link mitigation work and pricing could also create problems, as each insurer has a different approach to risk and takes into account various factors.

“The only way to resolve this issue and to ensure consistency is to require each insurer to ask essentially the same set of underwriting questions,” it says.

“In our view, this outcome is not consistent with the ideal of a competitive marketplace and creates challenges for insurers that have genuinely differing views about the efficacy of various mitigation measures.”

IAG supports a recommendation that would encourage homebuyers to consider insurance costs as part of their purchasing decision, but is against requiring sellers to gain estimates as part of the transaction.

“Real estate agents and private vendors may have a vested interest in understating the insurance costs to improve the saleability of the property,” it says.