The Federal Government’s financial system inquiry should “bite the bullet” and recommend a single regulator for general and health insurance, according to Deloitte Access Economics partner Ian Harper.

“I would park the prudential regulation of health insurance into [the Australian Prudential Regulation Authority] and let it oversee all these insurance products in a way it considers to be consistent,” he told the Insurance Council of Australia’s regulatory update seminar.

Professor Harper was a panel member on the Wallis inquiry, which reviewed the financial system in the 1990s.

He says the “twin peaks” structure comprising the prudential regulator and the Australian Securities and Investments Commission should remain.

“It has worked, but could do with a scrub-up because there has been mission creep over 16 years, as you would expect.”

He says the Reserve Bank has benefitted from a requirement to consider the effect of its actions on Australian economic growth.

“If you wanted to really shake up the other two regulators, you would want to give them a new remit somehow, not just to focus exclusively on stability all the time but to think about the other dimensions of economic welfare.”

Professor Harper also says the market must find innovative ways to meet demand for whole-of-life products that fund income and health needs as life spans increased.

Swiss Re Australia and New Zealand MD Mark Senkevics told a panel discussion the inquiry needs to find a balance on regulation and stability.

“It has been over-stepped a little bit here in terms of capital and prudential regulation and perhaps that is dampening the opportunity to innovate and to provide greater competition for the consumer,” he said.

The financial system inquiry, which is led by David Murray, will release an interim report in the middle of this year, with final recommendations expected by November.