The Insurance Council of Australia (ICA) has rejected any suggestion that liability policies covering financial company officials could undermine a crackdown on corporate misbehaviour.

A Treasury consultation paper proposes giving the Australian Prudential Regulation Authority (APRA) tougher powers to remove or disqualify people from senior company roles without applying to the Federal Court.

To ensure a deterrent effect “it may be necessary to prevent individuals from taking out insurance against removal and/or disqualification”, the paper suggests.

ICA says the current Federal Court process operates effectively and should remain, and there is no cause for insurance to be questioned.

Its submission “strongly disagrees with any view that suggests insurance contributes to poor behaviour – this is a misguided view that fails to properly consider the core role of insurance and its necessary conditions and exclusions”.

ICA says the consultation paper is unclear which type of insurance it refers to, but the group’s submission highlights that directors’ and officers’ (D&O) liability cover is critical for securing the appointment of key staff and ensuring they can make decisions.

“D&O insurance policies typically do not cover fraudulent, criminal or deliberately unjust actions, or where an individual acted for personal profit or gained illegal remuneration,” it says.

“Additionally, ICA is not aware of any evidence suggesting the prospect of removal and disqualification, under the current regulatory process, is not an effective deterrence against poor behaviour.”

The proposed Banking Executive Accountability Regime follows a parliamentary committee review of the big four banks, which found no individuals have been fired as a result of recent scandals.

ICA says it recognises that any expanded removal or disqualification powers given to APRA would apply across all institutions overseen by the regulator.