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The industry survives another barrage from MPs

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Friday’s hearing of the House of Representatives Standing Committee on Economics – a body which has previously demonstrated a sketchy understanding of how the insurance industry works – started with an announcement from committee Chair Tim Wilson that he and Insurance Council CEO Andrew Hall are "personal friends".

Mr Wilson apparently made the friendship clear to avoid any suspicion of conflict, but exchanges between politicians and industry representatives throughout the hearing were far from friendly.

The committee is tasked with tracking financial services companies’ response to Hayne royal commission reforms, but regulatory changes took up a surprisingly small part of the debate.

Instead, ICA and leading insurers came under fire over a range of issues such as business interruption claims, mouse plagues, paying cyber attack ransoms, rising motor insurance premiums, and climate change. The tone was hostile, but very few blows landed.

After an introduction where he explained the challenges facing the industry are the toughest in 20 years, Mr Hall was asked by Deputy Chair Andrew Leigh how ICA could justify appealing last year’s NSW Court of Appeal verdict on COVID-related business interruption claims.

As has reported, the High Court dismissed the appeal the very same day, but nobody knew that yet. Dr Leigh asked: “How do you justify opposing a judicial decision that set aside the Quarantine Act as grounds that an insurer could reject a business interruption claim?”

Mr Hall simply pointed out that seeking leave to appeal was ICA's right (some might argue its responsibility), but Dr Leigh was not persuaded.

“I get that it’s a right that you have, but businesses desperately need their insurers, and the peak body for insurers is trying to mobilise against businesses being able to claim at a time at which many of them have been hit for six. Is that really the right role for the Insurance Council?”

Mr Hall said the test cases are aimed at preventing hundreds of individual cases coming before the courts, and of course that the industry never intended to cover pandemics, for well-documented reasons.

The committee moved on to life insurance, and MPs expressed concerns about the sustainability of income protection products and commission-based remuneration structures.

But the most telling criticism came from Dr Leigh on JobKeeper.

ClearView MD Simon Swanson was asked whether the company had considered paying back $2.4 million in public funds received, given that the company’s accounts showed profits had held up during last year.

Mr Swanson said that no, it hadn't been considered. ClearView followed the law, qualified for JobKeeper and the funds ensured that staff were not threatened with redundancy.

“I’m not asking you about following the law,” Dr Leigh said. “I’m asking whether you believe it’s consistent with your corporate social responsibility, to be receiving corporate welfare to the tune of $2.4 million at a time when your profits didn’t fall?”

Mr Swanson said that taking JobKeeper and maintaining staff levels and financial stability meant ClearView would be around to pay future claims.

But Dr Leigh wouldn’t let it go, saying: “It isn’t too late to do the right thing and repay the taxpayer”. Mr Swanson eventually said the ClearView board would consider it, and that he’d report the result.

When the committee turned back to general insurance, executives from Suncorp, IAG, Allianz and QBE faced questions about a broad range of issues.

Dr Leigh was worried about vermin exclusions in policies in light of the mouse plague devastating some areas of regional NSW.

Each insurer confirmed the nature of the exclusions, but it appeared to be a non-issue in relation to customer complaints – of which there have been very few, if any.

Mr Wilson had clearly been reading about ransomware, and whether insurers ought to be reimbursing companies that decide to pay ransoms. But he didn’t get very far, as Australia’s major insurers are not big players in the cyber market.

Both he and Dr Leigh wanted to find out why car insurance premiums are going up, with the insurers confirming low single-digit rises are currently going through.

Mr Wilson thought technology in modern cars should reduce the number of collisions, while Dr Leigh pondered why his car insurance premium goes up each year while the value of his car goes down.

But the insurers had plenty of answers. Your vehicle may be going down in value but that’s just one aspect of the cover – the vehicles of other road users’ which you might damage are increasing in value overall, and the same modern tech that can reduce collisions makes any repair much more expensive to carry out.

And it’s not just about collisions either – motor insurance is significantly impacted by natural catastrophes such as hailstorms, which are increasing in frequency and severity.

Climate change was briefly tackled, with Labor’s Dr Leigh keen to pin down IAG and Suncorp on whether they support net zero emissions by 2050.

After some toing and froing they confirmed that they do. But if Dr Leigh was hoping for criticism of the Morrison government’s more vague aspirations, he was left disappointed. The major insurers, as ever, played a very straight bat.

The topic of climate change action also annoyed Mr Wilson, a Liberal, as party politics briefly raised its head. Mr Wilson asked Suncorp’s Lisa Harrison to confirm that it is global emissions, not just Australian emissions, that are causing concerning trends in our weather events. It was the sort of simplistic question one might expect to encounter in a country pub rather than the rarified air of Canberra.

When Ms Harrison concurred, he asserted that “we can dismiss the rubbish questions about specific government targets and focus on the real issues”.

There is a certain irony in that. While insurers were being encouraged by Dr Leigh on Friday afternoon to back greater emissions reductions, in a separate parliamentary hearing on Friday morning the insurers were attacked for withdrawing cover from coal mining companies.

Dr Leigh went on the attack over so-called loyalty taxes – where insurers sometimes charge renewing customers a higher premium than new customers.

But while executives confirmed that new customers do sometimes receive a discount, they were keen to point out that so too do loyal customers under a variety of circumstances, so the criticisms didn’t really stick.

The Federal Government’s reinsurance pool for northern Australia was also a topic for discussion, but the insurers were reluctant to offer a great deal of comment while the mechanics of the pool are still being worked out.

Mr Hall had earlier offered one concrete opinion – that the pool must have an end date.

“I think in Australia, if we do a reinsurance pool, whatever the design is it needs to be time-limited and needs to drive an incentive for building standards to be changed and improved.”

QBE was the final company to appear, and a significant chunk of time was wasted repeatedly asking Chief Risk Officer Jonathan Groves and CFO Chris Esson why former Group CEO Pat Regan was shown the exit last year.

The pair trotted out the company line about “inappropriate communication” and insisted they knew nothing more.

Dr Leigh’s persistent questions were to no avail, and in many ways summed up the day’s events.

The industry emerged relatively unscathed. But whether that would have been the case if the questions had been more relevant, more targeted, and more informed, we’ll never know.