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Flawed focus: ICA slams ACCC for covering old ground

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An inquiry into northern Australia’s premium affordability problem is revisiting “flawed ideas” that are destined to fail, warns the Insurance Council of Australia (ICA).

The Australian Competition and Consumer Commission (ACCC) yesterday released an update to its interim report, published in December, finalising 13 previously draft recommendations.

It also outlined ongoing consultation on “measures to improve affordability and availability” including reinsurance pools, mutuals and direct government subsidies.

ICA CEO Rob Whelan says these options have been considered by previous inquiries and found to be “unviable and too expensive”, and the industry is “disappointed” to see the ACCC examining them again.

“These initiatives have been tried in other countries and have failed to address the fundamental issue of reducing the risks through better planning, building and mitigation,” he said.

“Insurance in northern Australia should not be subsidised by the rest of the nation; this would be unfair and unsustainable.”

The 13 recommendations finalised yesterday are added to 15 already confirmed – making 28 in total.

ICA takes issue with a key recommendation that government should force insurers to participate in a national home insurance comparison website.

“Insurers do not support a national price comparison website for home insurance because it will not deliver useful information, since consumers in other parts of the country do not face the same level of risks as those who live in the north,” Mr Whelan said.

“The insurance industry would have preferred the ACCC offer practical recommendations that address the key drivers of pricing and availability of insurance in northern Australia – the high risk and impact of natural disasters (in particular cyclones and floods), high costs of materials and trades, inadequate building controls and poor-quality building stock.”

ICA says it continues to support ACCC’s recommendation on abolishing insurance stamp duty, and its push for disaster mitigation, but bemoans a lack of progress in both areas.

“The industry has emphatically supported the most powerful recommendation in the ACCC’s first report – that state stamp duties on insurance be abolished – because it will have the most direct and immediate impact on the affordability of insurance in northern Australia. Unfortunately, no progress has been made.

“Insurers also support the ACCC view that mitigation can improve affordability. Again, little progress has been made despite the Productivity Commission recommending the Federal Government invest at least $200 million a year in permanent mitigation and resilience measures, to be matched by state and territory governments.”

Yesterday National Insurance Brokers Association (NIBA) CEO Dallas Booth told he does not believe a comparison website will solve the issue, and mitigation is crucial.

However, NIBA said last month “some form of government intervention” such as a reinsurance pool may be required – putting it at odds with ICA.

Click here to see the ACCC’s report in full. Further submissions are due by September 6.