Suncorp has warned that people recovering from such catastrophes as the summer bushfires could face lengthier repair times and higher costs due to proposed claims-handling laws.

Draft legislation which is aimed at protecting consumers could require insurers to appoint suppliers involved in claims fulfillment as representatives, bringing thousands of small businesses under the oversight of the Australian Securities and Investments Commission.

Suncorp says building firms and subcontractors such as electricians and roofers, as well as smash repairers, could face a significant compliance burden as a result without a “clear and corresponding strengthening” in customer protection.

The reforms would slow down the recovery process for home rebuilding due to the time taken to appoint representatives, or because suppliers may choose not to undertake insurance work.

“The reduction in the number of small businesses undertaking insurance work would push up the cost of rebuild, thereby harming customer outcomes,” the insurer says in a submission to Treasury.

“It would reduce the ability for local trades and small businesses to undertake insurance work, including in response to the recent bushfires.”

Suncorp recommends the legislation should expressly exclude claims fulfillers who do not have authority to reject a claim from any licensing requirements, and says clarifying examples should be included in the legislation’s explanatory memorandum.

“Suncorp does not support those in the claims fulfillment chain to be required to be appointed either as authorised representatives or as representatives under the Corporations Act.”

The proposed legislation, developed following Hayne royal commission recommendations, will make claims-handling a financial service, and therefore subject to obligations to act efficiently, honestly and fairly.

Suncorp CEO Insurance Gary Dransfield says the company supports removing an insurance claims-handling exemption from the definition of “financial service” and welcomes many parts of the legislation.

But proposals related to the claims fulfillment supply chain are “unnecessarily onerous and will create new and large compliance burdens on small businesses”, he says in a covering letter to the submission.