Consumer group Choice believes the Financial System Inquiry (FSI) has paid too little attention to insurance in its interim report, and wants a “discrete review of insurance as a high priority”.

“We believe that the problems of… inadequate competition and complexity for consumers justify a much deeper analysis of problems in the insurance market than that presented in the interim report,” Choice says in its response to the interim report.

It says the FSI’s final report due in November should recommend to the Federal Government a separate inquiry into insurance.

Choice says such a review should focus on “future-proofing” insurance from the challenges of climate change, boosting competition and improving consumer outcomes.

The consumer group notes that Australians have experienced “significant premium increases across a range of insurance products” in recent years.

“The availability and affordability of various insurance products suggests further examination of this sector is warranted.”

Choice quotes the FSI’s observation in its interim report that the insurance sector has “similar levels of concentration and profitability to the banking sector”.

“We see this as a sign of inadequate competition, and there is evidence that this results in poor consumer outcomes,” Choice says.

“In comparable countries such as the UK insurance premiums have sharply decreased and investment returns have declined. In comparison, in the Australian insurance sector premiums have grown dramatically.”

Choice cites a 2014 report by the Climate Institute, “Buyer-Beware: Home Insurance, Extreme Weather and Climate Change”, which found that because of underinsurance, homeowners can receive insurance payouts equating to less than half what is required to replace their home.

It says in some high-risk locations premiums cost 10 times more than typical policies for low-risk locations.

“Consumers must be provided with more information about risk assessments in their local area to assist with initial purchasing decisions as well as to justify any insurance premium rises linked to hazards such as floods,” the Choice submission says.