Now that the Federal Government has announced a review into the use of unauthorised foreign insurers (UFI), don’t believe the problem is going to automatically go away. While the layman may say a simple solution would be to completely ban them, Insurance Council of Australia (ICA) Executive Director Alan Mason warns the problem is “far more complex than it first appears”.

“I think everyone has a simple opinion of the risks involved with using UFIs, and while ICA wants a level playing field for Australian insurers, we don’t want to cut competition,” he told Sunrise Exchange News. “We don’t necessarily want UFIs with good credentials to be excluded.”

Like most insurance industry groups, ICA will be delivering a submission to the Government review, which will headed by former Treasury Markets Group Executive Director Gary Potts.

Mr Mason says the problems associated with UFIs extend further than the risks associated with brokers’ PI cover and consumer protection.  He says some UFIs usually don’t have the same regulatory obligations or capital requirements as Australian insurers, which allows them to produce lower quality but more affordable cover. 

“The problem is that when a UFI is exposed or fails to pay out a claim, it reflects extremely badly on the Australian industry,” he said. “But it’s not our intention to freeze out competition. We don’t want that.”