Barriers to entry in Australia’s insurance market have soared and the costs and complexity of regulation make it almost impossible to launch a business, according to Richard Enthoven.

The Hollard and PetSure Australia director asked the sold-out insurtechLIVE26 conference in Sydney: “In the current regulatory landscape, could you start again?

“The very easy answer is no, you simply couldn’t. Regulation has become much more prescriptive and the minimum fixed costs of compliance have really skyrocketed.”

These costs now exceed the entire capital base Hollard Australia had at inception, when there was no internet-driven data risk and related oversight, he said.

While tighter consumer protection regimes are “community decisions”, Mr Enthoven said the “pendulum may have swung too far”.

“We have pushed very hard to protect individual cases, and what that effectively means is it’s harder for everybody,” he said, noting insurance premiums are higher as a result.  

“We’re starting to see some backlash around affordability of the product and I wouldn’t be surprised if the trend now is to wind that back. These things go in cycles.”

Mr Enthoven noted insurer insolvencies still occur overseas, but Australia has not had one since HIH in 2001, amid strong prudential oversight that “we just sort of take for granted”.  

But many banks and non-specialist providers have exited the home cover sector in recent years, and Mr Enthoven said policy settings for “something as important as home insurance should be making people want to get in, not want to get out”.

He said the competition watchdog’s opposition to IAG’s $1.35 billion acquisition of RAC Insurance may suggest a wave of industry consolidation is ending.  

“There’s not that much more to consolidate. By making the regulatory setting so challenging, most people involved in home insurance have decided to exit – over the past five or six years you’ve had all the banks say this is too hard. All the auto clubs, bar one, say this is too hard.  

“That is not a good situation for the market ... shareholders reaching the conclusion that the investment required, the scale required, the complexity that needed to be managed in personal insurance had become too difficult.  

“Now we’ve had this really important ruling in WA, it will be interesting to see how that progresses as it goes through the courts.

“But that feels like the first sort of line in the sand around consolidation.”

Mr Enthoven said building a “full-stack” insurer now requires “30 years and hundreds of millions of dollars”, and it is better to focus on solving one problem and “doing it super well, and offering that service to as many players in the industry as you can”.

He said Australian insurers adopt technology more quickly than global peers, and after many failed integration projects, large groups are ready for “plug-in” specialised software, opening the door to start-ups. 

“For businesses looking at doing a service really well and helping us reduce the complexity in our world, the time has never been better.”