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Falling short: MPs miss their mark during uninformed hearings

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The warning signs were there before last week’s parliamentary hearings into the insurance industry even started, with committee Chairman Tim Wilson stating falsely that the Hayne royal commission had identified “widespread misconduct” within the industry.

The House of Representatives Standing Committee on Economics’ two-day focus on insurance, part of a broader review including the big four banks, could have been a valuable exercise in understanding the industry and running the rule over key issues and challenges.

Instead it became mired in misunderstanding and wasted a valuable opportunity by failing to focus on important issues.

The MPs on the committee, it seems, didn’t do their homework, beyond perhaps a quick Google search. As online learning goes, they scored a D- at best.

Mr Wilson, who chairs the committee, opened proceedings by repeating his “widespread misconduct” claim. This despite insuranceNEWS.com.au – and industry members who contacted him directly – pointing out its inaccuracy.

“I note that [Hayne] did not find systemic issues with the general insurance industry,” Insurance Council of Australia (ICA) CEO Rob Whelan reminded MPs in his opening statement.

Mr Whelan also made clear, in his third sentence, that ICA “does not represent” the life insurance sector.

Cue WA MP Anne Aly’s question to Mr Whelan a short while later.

“I just wanted a commentary from you regarding the reports of the denial of payment or the intention to deny payment, in relation to COVID-19, particularly for medical workers, by TAL and the way that’s panned out.”

Awkward.

And the Chairman wasn’t much better, later that day asking AIA CEO Damien Mu whether the life insurer is an ICA member.

“We are a member of the [Financial Services Council],” he answered. Which reminds us that the FSC was not asked to appear – an oversight that increasingly looks to have stemmed from ignorance.

And still Mr Wilson didn’t get the message, asking IAG’s Peter Harmer the next day for his views on suicide exclusions in life policies, and the distressing suggestion from ClearView that customers under pressure from COVID-19 are increasingly calling up to check on that aspect of coverage.

“Specifically, we don’t issue or underwrite any life insurance,” Mr Harmer clarified. Again. For those not paying attention.

The committee’s Deputy Chairman, Labor MP Andrew Leigh, tried hard to shine a light on the industry’s response to natural disasters and COVID-19.

He’d clearly read up on some issues – but perhaps hadn’t sought the expert advice that would have enabled him to sort the wheat from the chaff.

On bushfires, he returned time and again to a Choice campaign highlighting apparently unfair fire exclusions in home policies.

These exclusions don’t give a great impression when read in isolation, and perhaps a standard definition would be worthwhile, but the industry says in practice there’s no big problem here, and the Australian Financial Complaints Authority doesn’t disagree.

Dr Leigh also seems to think that insurer embargoes during the bushfire crisis were a grave transgression, rather than a sensible way to stop residents avoiding buying insurance until a fire is coming over the hill.

Arguably the far greater issue regarding bushfire coverage is underinsurance, and the reasons for it (see insurance taxes, buying on price, etc), but that barely rated a mention. Not from Dr Leigh at least. Credit where credit’s due, Dr Aly did raise it, but there was hardly an in-depth discussion.

Dr Leigh was also very concerned about landlord insurers pursuing coronavirus-hit tenants directly for rent, and ICA’s refusal to order its members not to behave in this way.

ICA was simply saying that it’s up to individual insurers how they respond, rather than suggesting that this course of action is a good idea. And as far as insuranceNEWS.com.au can see, no insurers are acting in this way, with Suncorp categorically ruling it out.

The positives? Climate change got a good airing – sort of – thanks to Greens Leader Adam Bandt and Liberal denialist Craig Kelly, who holds a very different view.

Mr Bandt’s opening was clumsy, as he appeared to ask Mr Whelan (who does not claim to be a scientific expert) to predict precisely what degree rise the planet will see.

But his wider point was clear enough. The industry says it believes in the science. The science says we’re stuffed. So why isn’t the industry doing more to lobby for emissions reductions?

It’s a fair question, and one the insurers dodged to a large extent.

They agreed that increasingly frequent and severe extreme weather events could lead to uninsurability, but prefer to focus on mitigation and adaptation to resolve short-term and current risk than jump up and down about the underlying causes of the problem.

“I’m simply saying that our best strategy from an Insurance Council point of view – and our member companies – at this point in time is to engage in adaptation strategies to protect communities from the existing threats of extreme weather,” Mr Whelan said.

Mr Kelly was more worried about ICA’s claim that the summer just gone is “the worst natural disaster season on record” with $4.6 billion of losses so far. He doesn’t believe it, not for a minute.

He cited a paper that found that, under normalised figures, it is more like the seventh-worst. 1966 had insured losses of almost $9.7 billion, for example.

The same paper shows no increasing trend of normalised insurance losses either. “Therefore, statements such as, ‘climate change is making insurance losses worse,’ simply have no credibility.”

ICA says there is more to its statement on the disaster season than a pure dollar figure – including number of claims, number of events, and geographic spread. And it says there are plenty of other papers that form different conclusions to the one Mr Kelly relies on.

Disclosure was another important issue that was addressed – with the industry accepting that product disclosure statements don’t work. Nothing new there; that issue has been discussed to death.

ICA published a detailed report entitled Too long, didn’t read in 2015. It followed it up last year with a disclosure action plan. ASIC also published a report in October saying it was looking to move away from “an over-reliance on disclosure”.

Everyone agrees the current regime isn’t working, so why is it still in place? This committee hearing could have discussed a path to action. But the opportunity was lost, like so many others, and the moment passed.

Parliamentary committee inquiries used to act as a forum for MPs as policymakers to discuss with industry leaders the present and the future, with an eye to the way it all fits into the development of Australia. There was intelligent interest, with well-researched and relevant questions and mutual respect.

Today’s committee system is a shadow of what it was 20 years ago. The committees still have power but also negligible influence. Instead of being a wellspring of ideas and policies, they have become little more than arenas for political grandstanding and the airing of petty points of view.

Insurance is a key part of the national economy, interlinked with every facet of Australia’s life. There are a dozen very important subjects that deserved discussion with the eminent industry leaders who participated in last week’s hearings. But if the chairman of what should be a significant committee is so laid-back he can’t even bother to correct himself when he’s been told several times he’s wrong, you can’t expect much more from his committee members.

If the politicians involved had bothered to do some research – and that’s presumably why they have advisory staff – rather than Google a few current insurance-related issues or just push their own favourite barrows, last week’s sessions could have been a valuable exercise.