The Australian Consumers Insurance Lobby (ACIL) has asked Assistant Treasurer Stephen Jones to commission a report or inquiry into “market failure in the general insurance sector” as climate change and emerging risks exacerbate affordability and availability challenges.

ACIL points to excessive premiums for flood and bushfire cover, with some home premiums soaring as high as $20,000 in the aftermath of recent natural disasters, and says a sweeping review that goes beyond the narrower focus of other examinations is needed.

“We are wanting a review that covers off the market as a whole and that looks at the emerging issues,” ACIL Chairman Tyrone Shandiman told insuranceNEWS.com.au. “Reviews so far have looked retrospectively at problems many years after they should have been dealt with.”

Mr Shandiman says a Climate Council report also highlights increasing affordability problems. That report found that 1 in 20 of those surveyed said they had cancelled their insurance due to premium increases, while 21% reported having no insurance.

The Federal Government has established a Cyclone Reinsurance Pool following pressures in northern Queensland, and a future review is scheduled, but Mr Shandiman says it took many years for the pool to be agreed and the review will centre on issues related to its operation.

The Government’s new Hazards Insurance Partnership, formed to engage with the industry on mitigation measures that will put downward pressure on premiums, and a previous small business ombudsman review also don’t address the complete range of issues, he says.

“There has been no definition by anyone of what market failure is, so it’s easy for an insurer to say there is no market failure when there are no guidelines, and that is one of things we want in the report,” he said.

ACIL says an inquiry should encompass areas such as identifying market failures, examining challenges, recommending measures to reduce the impact of failures, identifying emerging risks, and providing guidance for consumers, insurers, and the government on appropriate actions.

Unaffordable premiums disproportionately affect financially constrained individuals and businesses, increase vulnerability and place a strain on government resources and safety nets, the group says.

“The impacts of market failure in insurance are far-reaching and detrimental to society,” it says.

The Insurance Council of Australia (ICA) says it understands cost of living pressures are being felt by consumers because of price rises across almost every product and service, including insurance.

But it says the only sustainable way to counter the upward pressure on insurance costs is to reduce risks, and state governments could also bring down the cost of cover by 10-30% immediately by removing taxes on cover.

“We agree with ACIL that insurance affordability and availability constraints can have significant negative consequences – that’s why the ICA and insurers have been so forthright in our advocacy on this issue,” a spokesperson said.

“But the answer isn’t another inquiry – there have been so many over the last 15 years and they all say the same thing – it’s doing the hard work of reducing risk and removing those imposts that only add to the cost of insurance.”