Increased regulatory requirements are holding back industry innovation as insurers expend more resources on compliance, the Insurance Council of Australia has warned a federal parliamentary committee.

GM Policy Regulation John Anning says the insurance industry is keen to develop new products for the digital economy.

“The customer experience with general insurance is currently changing greatly, with growing customer empowerment driven by widespread use of the internet, interactive digital technology and social networks,” he told the Standing Committee on Economics’ inquiry into business investment impediments. 

“These developments hold great promise for better customer outcomes.

“However, our members tell us the greatest impediment to investment in innovation is the increasing need over recent years to devote resources to regulatory compliance.”

Mr Anning says the industry is not against reviews and inquiries, which are productive if outcomes are duly considered and acted upon. But the tendency to address issues via regulation, “regardless of whether it is necessary or the most appropriate” policy response, is a concern.

Northern Australia’s long-running insurance woes are, to a degree, tied to a reliance on repetitive reviews and inquiries instead of action, he says.

“The impact of natural disasters on the pricing of insurance in northern Australia has been looked at numerous times, but it appears easier to initiate another inquiry by a different regulator than tackle questions about appropriate land use and mitigation in the face of disaster risk.

“It is difficult to see that new insurers would be willing to invest in offering insurance in northern Australia when the regulatory regime may be dramatically altered with the introduction of a government-backed reinsurance pool or mutual insurer.”