Home insurance profitability remains a challenge for the industry and it should not be cross-subsidised by other lines of business, Insurance Council of Australia (ICA) CEO Andrew Hall has told a parliamentary committee inquiry. 

ICA was today questioned on why insurers point to profitability issues, as premiums keep rising, when statistics presented to the inquiry last week pointed to a five-fold sector increase in net profit to $4.6 billion. 

Mr Hall said home insurance is under extreme pressure and has been running at a loss in recent years, and the profit figure cited included returns on investment pools, improvements in commercial lines and provision releases. 

“We want insurance products to be able to stand on their own two feet, they shouldn’t be cross-subsiding each other,” he told the House of Representatives Standing Committee on Economics this morning. “Home and contents needs to be a profitable business so that we can pay the claims when they fall due.” 

Mr Hall apologised in his opening statement to customers whose claims were not handled to expected standards during the 2022 flood catastrophes. 

“Not all systems or processes of insurers passed the test of 2022, and this had very real impacts – impacts that we heard about through the testimony of the legal and financial advice groups last week,” he said. 

The inquiry, which is looking into insurers’ responses to the record-breaking 2022 floods, last week heard examples of consumers feeling “coerced and gaslit” and of poor performance by insurers. 

Independent MP Andrew Gee pressed Mr Hall to acknowledge that examples highlighted were “embarrassing and shameful” for the industry. 

“We’re not proud of it, and those stories don’t bring great glory to our industry,” Mr Hall said. “We are constantly striving to do better.” 

Mr Hall said it was the first time he had heard of industry employees discussing bonuses in front of flood-affected policyholders, and it sounded unlike customer-facing staff who visit community forums and who are trained to deal with claims. 

“They’re not the sort of people that would sit there and make those sorts of comments ordinarily. My offer to you though is at any time, if something like this comes through your door, we would happily investigate it.” 

Suncorp CEO Steve Johnston told the inquiry the company is investing to improve its internal complaints handling and processes, following a high percentage of disputes that were overturned in favour of policyholders. 

Insurers have said they are acting to better address vulnerability and that issues around claims handling will be part of the current review of the code of practice. 

ICA and Suncorp also said increased mitigation spending is critical and more needs to be done to assist those living at high-risk locations due to past poor planning decisions. 

Mr Johnston said homeowners often think their homes are well maintained when that might not be the case, and was asked if there was scope to better identify and prevent issues with properties before there is a claim. 

“I think that’s the future of insurance,” he said. “We have to stare into this; as an insurance company we have to get better at designing products that try to provide an affordable solution, and we’ve got to focus on the resilience and mitigation.” 

IAG CEO Nick Hawkins told the inquiry the company is “highly supportive” of greater collaboration across the industry to reduce confusion over the coverage of an insurance policy. 

“That doesn't mean that every insurance policy should be exactly the same. It should be, when an insurance policy talks about something or excludes something in particular, that the words that are used for that are common across the industry,” he said. 

“We’re supportive of more common wording across the industry, not necessarily standard terms and conditions, because I think having different forms of insurance that are appropriate for different customers or communities or businesses is reasonable, but within the contracts, the standard words, I think, is really a good thing for our country.”