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Industry reviews: a road to nowhere

Regulation is the key to a healthy, effectively functioning insurance industry.

Sometimes it is necessary to run a magnifying glass over the industry, to expose problems that need addressing. But an inquiry is only useful if it leads to actual change.

In a submission to the parliamentary inquiry into impediments to business investment, the Insurance Council of Australia (ICA) had compiled a list of more than 25 inquiries and reviews by federal and state governments and regulatory authorities since 2011, many of which are needlessly repetitive.

For example, the issues around the high costs of insurance in northern Australia has come up in at least eight of the reviews – one of them ongoing.

In some cases, government reviews of the insurance or banking industries are initiated simply due to political pressure to “do something” about an issue. Its relative importance to a smoother economy or consumer advantage isn’t necessarily the dominant cause.

The Hayne royal commission illustrates just how simple-minded some governments can be in assessing public need against political interest.

The royal commission into misbehaviour by “financial services” entities – although the primary target was the big four banks – was labelled “regrettable but necessary” by Treasurer Scott Morrison as the Federal Government reluctantly bowed to public and opposition pressure.

Within days of the first evidence being heard in the royal commission ministers were falling over themselves to perform mea culpas when the extent of corporate misbehaviour was revealed.

In the case of insurance, there’s a belief that governments launch inquiries like the northern Australia mixture to relieve localised political pressure rather than to find solutions. ICA says issues are often picked up, inquired into and dropped once political attention moves elsewhere, and the sheer number of reviews and inquiries is taking its toll.

It laments the considerable time and resources required to compile submissions, attend meetings and respond to data and information requests – costs that are often not considered when assessing the regulatory burden.

To the extent that these reviews and inquiries are partially or wholly duplicative and not genuine attempts to reform the regulatory framework, these costs represent wasted resources that could be invested in business processes and consumer initiatives, ICA says.

In his opening address to ICA’s annual forum in March, CEO Rob Whelan noted reform fatigue has set in.

“At some point we need to pause – to take stock of the cumulative impact of regulatory change, the capacity for the industry to implement the changes and the commensurate increase in costs that may be passed on to consumers,” he told the audience.

ICA is calling for a more considered approach to the introduction of new reviews and inquiries. Attention should be given to past inquiries and their outcomes, and the outcomes of any recent reforms, pending reforms and industry self-regulation.

This would reduce the likelihood of repetitive inquiries, and provide a more strategic approach to policymaking, ICA says.

The National Insurance Brokers Association (NIBA) has also called for a more structured approach to regulatory reform.

CEO Dallas Booth tells insuranceNEWS.com.au the association recognises governments are under political pressure, but it’s critical to properly investigate and substantiate issues first, then present a genuine range of reform options including a cost-benefit analysis.

The responsibility for that lies with the minister in charge, he says.

But there is no sign the Government has listened.

In a speech at the ICA forum – immediately following Mr Whelan’s address –Revenue and Financial Services Minister Kelly O’Dwyer noted the Government has initiated yet another review of insurance affordability in northern Australia, this time overseen by the Australian Competition and Consumer Commission.

The Northern Australian Insurance Premiums Taskforce has already recommended that disaster mitigation is the only way to lower premiums in the region – a finding the Government accepted.

Ms O’Dwyer says the competition watchdog has compulsory information-gathering powers the other reviews lacked.

No one disagrees with the fact there are issues in the industry that need addressing.

But repeated inquiries and reviews that lead nowhere stymie good policy development, delay improvements to regulations and are a waste of everybody’s time.

Major inquiries and reviews since 2011

2011

  • Natural Disaster Insurance Review
  • Review of the economic potential of older Australians (Advisory Panel on the Economic Potential of Senior Australians)

2012

  • Review of strata title insurance price rises in north Queensland (Australian Government Actuary)
  • Consultation on unfair contract terms protections for insurance contracts (Treasury)

2013

  • Inquiry into older workers and Commonwealth laws (Australian Law Reform Commission)
  • Inquiry into volunteers, age and insurance (Anti-Discrimination Commissioner Tasmania)

2014

  • Financial System Inquiry
  • Review of the sale of home insurance (Australian Securities and Investments Commission)
  • Review of strata title insurance price rises in north Queensland (AGA)
  • Review of home and contents prices in north Queensland (AGA)
  • Inquiry into serious invasions of privacy (Australian Law Reform Commission)

2015

  • Review of age discrimination and insurance (Australian Human Rights Commission)
  • Australian Consumer Law Review
  • Inquiry into disaster funding (Productivity Commission)

2016

  • Review of general insurance sold through car dealerships (ASIC)
  • Northern Australia Insurance Premiums Taskforce review
  • Reform to privacy breach notification (Treasury)
  • Introduction of an industry funding model for ASIC (Treasury)

2017

  • Inquiry into general insurance (Senate Economics References Committee)
  • Inquiry into consumer protection in the banking, insurance and financial sector (Senate Economics References Committee)
  • Reforms to the emergency services levy in NSW
  • Review of ASIC’s enforcement powers (ASIC Enforcement Review Taskforce)
  • Inquiry into data availability and use (Productivity Commission)
  • Review of the financial system external dispute resolution framework (Treasury)

Ongoing

  • Inquiry into competition in the Australian financial system (Productivity Commission)
  • Inquiry into the supply of insurance in northern Australia (ACCC)
  • Royal commission on misconduct in financial services.

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