The Australian Prudential Regulation Authority plans to channel more resources into tackling the country’s worsening home insurance protection gap.

It will partner with public and private stakeholders to identify initiatives and explore changes to insurance data collection and the prudential framework to help inform and address the problem, according to its 2024-25 corporate plan, released yesterday.

The insurance protection gap is one of nine issues targeted under “strategic shifts in the corporate plan”, which outlines the regulator’s work for the next four years.

“Following careful consideration of the operating environment, APRA has identified strategic shifts in regulatory focus that reflect our assessment of the significance of these risks,” the plan says.

“The scope and intensity of planned work has been calibrated to reflect APRA’s resources and risks in the operating environment.”

The plan says general insurance plays an important role protecting people from unexpected events, but parts of the country face a widening protection gap in home insurance, resulting from affordability and availability challenges.

“The drivers of this risk are complex and include increasing cost of claims, supply chain inflation and changing dynamics in the global reinsurance market, as well as the increasing frequency and severity of natural catastrophes.”

The regulator says its insurance regulatory activities will aim to “put downward pressure” on premiums. Steps will include working with insurers, communities and government to better understand coverage gaps and risk mitigation measures, and fostering greater transparency on the drivers of premium changes.

APRA is also reviewing reinsurance prudential requirements to consider ways to improve access to alternative arrangements for general insurers.

The regulator says the economic environment has added to insurance pressure on households.

“Higher interest rates are expected to continue to weigh on the economic outlook for households ... this is contributing to an overall softening in household spending and below-trend economic growth, and is likely one of several factors driving reduced levels of insurance coverage across the country.”

Click here for the plan.

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