Financial Services Minister Daniel Mulino is “continuing to work on” possible government intervention to help high-risk homeowners who are being priced out of insurance.

Dr Mulino and a delegation of insurance executives visited Europe last year, partly to consider solutions in other jurisdictions, and the minister later said a “full menu” of options was being considered.

In a speech to the Australian Financial Review’s insurance conference today, Dr Mulino suggested intervention will be necessary.

“This is an area that I will continue to work on. It is a wicked problem,” he said. “Most other countries have seen governments lean in in some way. This is an area where markets left to themselves struggle to provide affordable insurance to everybody in the community.”

In an interview with insuranceNEWS.com.au following the speech, Dr Mulino declined to outline his preferred approach or discuss specific measures, and confirmed there is no timescale for progress.

“It is a priority of mine, and one of the key focuses of that delegation,” he said. “But we are still at the point of engaging with stakeholders and undertaking analysis.”

Dr Mulino said he is no fan of price caps, which he believes have caused unwanted consequences in California, but he did not put forward a view on other options such as flood pools or subsidies.

“There are some market interventions that have not worked well. So, generally, I am not predisposed to price caps. But we are still stepping through various approaches.”

Dr Mulino addressed the importance of mitigation, and he hailed the Disaster Ready Fund and Hazards Insurance Partnership as world-leading and embedded in the nation’s “architecture”.

He told insuranceNEWS.com.au he is aware industry wants an increase in mitigation spending, but he says the focus is currently on the DRF and selecting projects that will reduce risk and therefore increase insurance coverage and lower premiums.

“I understand that the Insurance Council of Australia would like there to be higher levels of funding,” he said. “I understand what the industry is seeking to achieve and the government is obviously supportive of risk reduction.”

But he said requests for additional funding must fit into the “fiscal envelope”, and it should be noted how much progress has been made.

“We need to look at the DRF relative to where we were five, 10 years ago. We have turned the dial a lot. I do understand that some stakeholders would like more, but a lot has been achieved.”

In his speech, Dr Mulino discussed measures funded in the federal budget to increase pricing transparency.

He said transparency is critical for consumers to understand premium levels and changes, but it is a “subtle and nuanced” issue and “not always easy” to pull out aspects such as reinsurance costs.

“At the very least, I think it is going to be possible to say on a traffic light scale, for example, here are the major hazards – bushfire, storm, flood, earthquake – you are green on all of them and your premium is fairly low. Or you are green on all of them except flood because you live near a river, and it’s fairly high.

“If someone’s premium changes by 20%, is it that [they have] gone from amber to red on flood? A better job needs to be done on that kind of explanation.”

Dr Mulino told insuranceNEWS.com.au talks with stakeholders are under way and a discussion paper on premium breakdowns may be released.

“I go into this with an open mind on what solutions might look like,” he said.

“I want to hear from insurers and consumer groups around what’s going to work. We don’t have any confirmed process yet.”

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