Mulino wants holistic view on affordability, but rejects price caps
A “full menu of options” should be considered when addressing insurance affordability and availability, Financial Services Minister Daniel Mulino said today.
Public and private risk-sharing schemes overseas are delivering mixed results and it is too soon to discuss potential models for Australia, but as an economist, he does not favour price caps, which bring supply side implications, he told the Insurance Council of Australia conference in Sydney.
“There are some things that, for me, I can instinctively say I wouldn’t be drawn to,” he said. “There are many other approaches where there’s a lot of devil in the detail, and so that’s where I think we’ve just got to cautiously have a look at what’s going on."
Dr Mulino and insurance executives recently returned from Europe, where they discussed resilience and the protection gap with reinsurers, insurers, brokers and regulators.
The minister told the conference a holistic approach is required, with risk mitigation, consumer experience and land use planning among central issues.
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“I don’t want to get too far ahead of any discussion that we are having. The important point for me is that we are already on a path of mitigation.”
When asked about ICA’s proposal for a federal and state $30 billion 10-year flood defence fund, Dr Mulino noted the government has introduced the $1 billion five-year Disaster Ready Fund, which triggers matching state and territory money.
“A billion over five years is a really significant uplift from where it had been even five years ago. We need to keep rolling that program out at the moment and making sure we’re putting good risk reduction projects in place, and then I think we need to make sure the industry is then reflecting that in reduced premiums for communities that are benefiting.”
Dr Mulino said other markets have similar challenges to those in general insurance.
“We deal with these kinds of issues in a range of other insurance contexts – life insurance, health insurance – where there are particular consumers with particular identifiable high risks, and there’s a range of approaches that can be looked at.
“I think now’s the time to start looking at that full menu of options and looking at the pros and cons.”