Regulatory compliance costs as much as $3.5 billion a year as overlaps and complexity undermine intended benefits for consumers, the Insurance Council of Australia says. 

More than 25 federal, state and territory regulators enforce more than 300 regulatory instruments, creating at least 30,000 discrete obligations, an ICA report released today says.

Specialty insurers, such as those in medical indemnity, are subject to additional oversight.

Annual compliance costs are estimated at $2.5-$3.5 billion, representing 4%-6% of industry gross written premium.

“Australian insurance customers and our financial system benefit greatly from mature regulatory arrangements that are well-balanced,” CEO Andrew Hall said.

“However, it’s important that we ensure the cost of regulation – which is ultimately borne by consumers – is proportionate to the problems we’re attempting to solve.”

Much of the cost relates to reporting and governance obligations, particularly around data reporting, privacy and cyber, claims handling, sales and distribution, and breach reporting.

ICA says 66% of regulations are prescriptive, dictating how insurers must comply rather than desired outcomes, which can stifle innovation, disproportionately affect smaller insurers and lock customers into inflexible processes that provide little benefit.

The group has called for action on overlapping inquiries and duplication among regulators, such as where one breach is reported to multiple organisations.  

Problem areas include mandatory cash settlement fact sheets that can slow simple payments, such as for contents, with outsized compliance risks for minor errors, while anti-hawking rules can prevent consumers from obtaining relevant cover, the report says. 

Anti-hawking laws, the deferred sales model, design and distribution obligations and other rules have created a “complex web of overlapping procedural requirements”. 

Regulatory Guide 271’s expanded complaint definition is increasing front-line teams’ admin workload and making it harder to distinguish serious problems from minor gripes, while breach reporting changes mean compliance staff are occupied with documenting minor incidents rather than preventing material problems. 

The report says effective regulation is essential for market stability and customer trust, and the objective is “not to argue for less regulation but for better regulation”. 

The Insurance Council and (re)insurer CEOs last week attended a roundtable hosted by the Australian Prudential Regulation Authority on the issue, with the next step to involve a “deeper dive into particularly burdensome regulations”. 

The ICA report is available here.