The general insurance industry has until the end of this month to respond to a Treasury discussion document on improving disclosure in general insurance.

The paper poses questions relating to recommendations made in a Senate Economics References Committee report on the industry.

It seeks views on component pricing, disclosure of year-on-year premiums, standard cover and definitions, and key facts sheets.

“Improving disclosure practices of the insurance industry will enable consumers to be informed and ensure the market remains fair and competitive,” Treasury says.

“Lack of transparency or poor disclosure practices limit choice and make it harder for consumers to make informed and appropriate decisions on insurance coverage.”

The Insurance Council of Australia (ICA) says its members are formulating an industry response.

“The general insurance industry has long recognised the shortcomings of the product disclosure regime for general insurance and has a program of work to improve consumer outcomes,” a spokesman said.

“However, helping consumers make better decisions about general insurance is a complex challenge. The challenges include the type of information and how it’s provided, plus consumer financial capability and willingness to engage with insurance products.

“ICA is looking at practical ways to tackle these challenges.”

National Insurance Brokers Association CEO Dallas Booth believes an improved standard cover regime could ditch the discredited product disclosure statement (PDS).

Mr Booth says the current approach to standard cover is “not reasonable”, because insurers can easily deviate from it by carrying a disclaimer in the PDS.

Research has shown the PDS is not widely read, and therefore consumers can make incorrect assumptions about coverage.

Mr Booth says it would be relatively easy to devise a stricter standard cover regime.

“This would become the minimum offering and insurers could compete by offering more on top of that. You could not fully mandate it, but to deviate from it would require a seriously informed consent process.

“If [the minimum cover] meets community assumptions, then the current PDS would become irrelevant.”

To respond to the Treasury document before February 28, click here.