The Insurance Council of Australia (ICA) remains sceptical that the Treasury’s revised draft product design and distribution bill can be applied to the industry.

It wants clarification on a number of outstanding concerns, particularly on policy renewals and scalability and mass-market insurance products.

“[ICA] strongly submits that there needs to be greater clarity in the bill around how the design and distribution obligations are intended to operate generally for mass-market products and apply to insurance policy renewals in particular,” the peak body says in a submission.

“Without practicable outcomes on these issues, the [industry is] concerned the obligations will hinder rather than increase the likelihood that consumers buy insurance suitable to their needs as they face more, and unnecessarily, complex purchasing processes.”

ICA says the decision to treat policy renewals as the issue of a new product may mean insurers will have to overhaul processes for collecting information.

One major industry player has estimated such an overhaul could cost it $62 million a year, and ICA says costs will ultimately be passed on to consumers through higher premiums.

“While the estimated costs to amend existing systems and processes may be high, these costs may be justified if they result in better consumer outcomes. However, [ICA] cannot understand how complicating existing efficient and effective processes will actually improve consumer outcomes.

“In fact, we are concerned they will have the opposite and unintended effect of making insurance renewals less accessible, potentially resulting in a large number of consumers being unintentionally uninsured as a result of the introduction of friction into the renewal process.”