The Australian Prudential Regulation Authority (APRA) has argued against any watering-down of the duty of disclosure in its submissions to the Hayne royal commission.

In its submission to the policy questions on insurance, APRA says doing so could result in increased premiums.

“If the onus on consumers to make full disclosures to insurers was lessened, insurers would likely respond by including an additional risk margin in their pricing or may, in extreme cases, be unable to insure the risk and so withdraw from the market.”

APRA is against banning certain types of insurance product, but says all products need to be designed and sold in a way that is fair to consumers.

It backs suggested moves to give the Australian Securities and Investments Commission (ASIC) jurisdiction over the handling and settlement of claims, “and supports obligations on insurers to undertake these functions efficiently, honestly and fairly”.

APRA also defended its approach to misconduct after fierce criticism from the royal commission.

In his interim report Commissioner Kenneth Hayne is highly critical of APRA and ASIC, questioning why more severe enforcement action has not been taken.

But in its submission to the report, APRA defends its approach and insists industry take its share of responsibility for conduct.

“APRA believes its response to misconduct and misconduct risk has been broadly appropriate given its core prudential mandate and risk-focused approach,” it says.

“Ultimately, behavioural change will occur only if boards take ownership for the actions of their organisations and the consequences of those actions.

“There is a role for [APRA and ASIC] here as the regulators in setting and enforcing standards of governance, accountability and risk culture.

“However, solutions to past problems must involve industry taking more responsibility, not less, for maintaining appropriate standards of conduct and guarding against misconduct.”

APRA says there is no “single or straightforward solution” to misconduct in financial services.

“The way forward is likely to involve a range of complementary measures, involving constructive interaction between institutions, industry bodies, regulators and government.”