The Australian Prudential Regulation Authority (APRA) says “poor product design” is contributing to insurance affordability issues, and has pledged to work with insurers to make improvements.

APRA Chairman Wayne Byres told the Financial Services Institute of Australasia’s “The Regulators” event that affordability and availability is “at the heart” of APRA’s insurance strategy.

He says a common theme across general, life and health insurance is unaffordability and unavailability.

“Be it because of poor product design, rising claim costs, increasing litigation, or a changing climate, insurers are increasingly raising the price and/or reducing the coverage of the policies they sell,” he said.

“While that may be a sensible business decision for individual insurers in the short run, in the long run it leads to premiums that become unaffordable, cover that is poor value, or even products that are simply not available.”

Mr Byres says APRA has an important role to play in averting poor outcomes.

“There isn’t a single solution, but we can make sure insurers improve their product design, pricing, claims and exposure management.

“We can work with our public sector colleagues to examine the underlying drivers of the problem and explore ways in which the trends can be reversed.

“And we can encourage the provision of information to policyholders to help them understand how they can contribute to risk mitigation.

“Addressing this issue is at the heart of our insurance industry strategy.”