The Insurance Council of Australia (ICA) is undertaking a review of the insurance sector’s options for reforms to improve its contribution to national economic recovery and growth, amid concern from insurers, stakeholders and the community about the availability and affordability of some categories of cover for certain groups of customers.
A range of inquiries and reviews over the past decade focused on issues of insurance affordability and availability in high-risk areas or sectors and have identified potential coverage gaps for some groups of consumers and businesses.
The aim of this review is to provide a summary of practical solutions to problems that have been challenging sectors of the economy for a decade or more.
ICA CEO Andrew Hall says insurance exists to transfer risk from consumers and businesses in a manner that enables them to pursue their affairs confident they will receive support to recover financially from any insured risks.
“As our nation navigates the COVID economic recovery, it’s important to understand that nothing can happen without insurance providing essential coverage for insurable risks,” Mr Hall said.
“The private insurance market performs this risk transfer process successfully on the whole, however the industry is keen to examine where it can do more to manage issues of affordability or availability.
“In many of these cases, insurers themselves are also under pressure to provide a profitable product, so solutions are often difficult to determine.
“While changes in availability or affordability of insurance send a price signal about the risks that are present, we know that where there are acute issues we need to find ways forward so economic prosperity is not hindered or risk shifted back on those without the capacity to properly manage it.
“That is why the Insurance Council has engaged industry expert John Trowbridge and leading economist Michael Blythe to undertake this important review and recommend ways forward for the industry and policy makers.”
Mr Trowbridge said that while the issues around affordability and availability were well known, there has been a lack of agreement on potential solutions. “As has been recognised by the recent Royal Commission into National Natural Disaster Arrangements, the ACCC Northern Australia Insurance Inquiry, and Australian Small Business and Family Enterprise Ombudsman’s report, some of these issues can be addressed with industry
initiatives or regulatory reforms, but some may be beyond the ability of the private insurance industry to resolve on its own,” Mr Trowbridge said.
“The consultation paper will review various potential solutions and flag questions for policymakers, stakeholders and the industry to consider in order to move these important issues forward.”
Engagement with stakeholders has started and a consultation paper will be released in March, and a final report including recommendations is expected to be released mid-year.