The insurance industry believes that while the focus of next year’s financial system inquiry is skewed towards banking, it provides an opportunity to examine risk management and financing.

The Federal Government last week released a two-page draft terms of reference, with only one reference to insurance: that the inquiry will consider emerging opportunities and challenges, including “changes in the way Australia sources and distributes capital, including the intermediation of savings through banks, non-bank financial institutions, insurance companies, superannuation funds and capital markets”.

Insurance Council of Australia CEO Rob Whelan says the inquiry is a chance to review the long-term nature of general insurance markets “and the growing role of technology in risk pricing and in narrowing information asymmetry”.

It could examine policy to support access and choice in general insurance and risk management, and the appropriate balance between stability and competition and their impact on premiums.

National Insurance Brokers Association CEO Dallas Booth told insuranceNEWS.com.au his board will consider whether to request the terms be expanded, although he notes the draft provides plenty of scope for a comprehensive review of the financial system.

Mr Booth says the terms do not specifically address risk financing, although financing large-scale natural and other disasters has been a major challenge in recent years.

TressCox Lawyers Lead Partner Michael Bracken says the draft terms indicate the inquiry – to be led by former Commonwealth Bank CEO David Murray – is focused on capital inflows, banking and superannuation, and any impact on insurance is not readily apparent.

But he says the role of regulators might be raised because of business concerns that the Australian Securities and Investments Commission and Australian Prudential Regulation Authority have become more invasive following the global financial crisis.

Mr Bracken says there might be calls for clarification of the regulators’ mandates, particularly over moves to harmonise standards across insurance and banking.

Ernst & Young Insurance Leader Grant Peters expects regulation and capital requirements to be raised by insurers and other financial institutions affected by global integration of financial regulation.

He told insuranceNEWS.com.au the impact of technology on consumers’ buying behaviour and the cost of advice are also likely to figure, and the inquiry will give insurers the opportunity to raise the impact of stamp duty on premiums.

The Government will take feedback on the draft and release the final terms of reference next month, with the inquiry due to publish an interim report by next September and a final report the following November.