A revised and improved standard cover regime could do away with the discredited product disclosure statement (PDS), a leading broker advocate says.

National Insurance Brokers Association CEO Dallas Booth made the suggestion today after Treasury published a discussion document on disclosure in general insurance.

Mr Booth says the current approach to standard cover is “not reasonable”, as insurers can easily deviate from it by including a disclaimer in the PDS.

Research has shown that the PDS document is not widely read by consumers, who could therefore make incorrect assumptions about coverage.

Mr Booth says it would be relatively easy to devise a more strict standard cover regime.

“This would become the minimum offering and insurers could compete by offering more on top of that. You could not fully mandate it, but to deviate from it would require a seriously informed consent process.

“If [the minimum cover] meets community assumptions then the current PDS would become irrelevant.”

The Treasury paper poses a string of questions relating to recommendations made in the Senate Economics References Committee’s report into general insurance published last August.

It seeks views on component pricing, disclosure of year-on-year premiums, standard cover and definitions, and the key facts sheet.

“Improving disclosure practices of the insurance industry will enable consumers to be informed and ensure the market remains fair and competitive,” the Treasury paper says.

“Lack of transparency or poor disclosure practices limits choice and makes it harder for consumers to make informed and appropriate decisions on insurance coverage.”

The Consumer Action Law Centre has welcomed the paper’s focus on the “longstanding problem”, and agrees that revisiting the standard cover regime could be a key part of the solution.

“The standard cover regime has been in place for 30 years but has failed to have any impact on the way insurance is bought or sold,” Senior Policy Officer Cat Newton told insuranceNEWS.com.au.

She says the current system sets “a really low bar” and is too easy for insurers to deviate from using the PDS, “which most don’t read or understand”.

Most importantly, she says consumers are not even aware the standard cover regime exists.

“This is a really important opportunity to reimagine the standard cover regime,” she said.

The Insurance Council of Australia (ICA) says its members are formulating an industry response to the Treasury paper.

“The general insurance industry has long recognised the shortcomings of the product disclosure regime for general insurance and has an ongoing program of work to improve consumer outcomes,” a spokesman said.

“However, helping consumers make better decisions about general insurance involves complex challenges.

“[They] include the type of information and how it’s provided, as well as consumers’ financial capability and willingness to engage with insurance products. ICA is looking at practical ways to tackle these challenges.”

Click here to respond to the Treasury document before February 28.