The Insurance Council of Australia (ICA) wants the International Accounting Standards Board to change its proposed standard for insurance contracts, which it says disadvantages general insurers that write long-term contracts.

The proposed insurance contracts exposure draft will particularly affect lenders’ mortgage insurers (LMIs), ICA has told the London-based board.

The standard aims to provide consistent accounting for insurance contracts and make it easier to understand how contracts affect an insurer’s financial position.

But ICA says the draft does not accurately portray the protection being provided.

“The insurance council is concerned that the accounting standard… may adversely affect the LMI industry through distortion of reported performance figures.”

In Australia, the entire LMI premium is paid at the beginning of the contract, and the coverage applies to the whole life of the underlying item, so the risk is significantly different from other long-term products such as life insurance, ICA says.