If insurers want less regulation they should improve their behaviour, a consumer lobby group has said after an industry report showed oversight costs up to $3.5 billion a year.

“Government regulation is introduced when there’s evidence of misconduct, poor consumer outcomes or systemic failure,” Australian Consumers Insurance Lobby chair Tyrone Shandiman said.

“The way to reduce red tape isn’t by lobbying for less oversight – it’s by demonstrating that you no longer need it.”

The group has raised concerns over slow progress on the General Insurance Code of Practice review and has written to Assistant Treasurer Daniel Mulino seeking clarification on the status of the 2022 floods inquiry’s 86 recommendations.

“We’ve heard nothing from the industry on the code of practice review for months,” Mr Shandiman said. “If the industry can’t get its own house in order, it shouldn’t be arguing for less government oversight.”

The Insurance Council of Australia report, released last week, says more than 25 federal, state and territory regulators enforce more than 300 regulatory instruments, creating at least 30,000 discrete obligations.

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

The group has called for action on duplication among regulators and says a collection of sales-related laws designed in isolation have created a complex web of overlapping procedural requirements.

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 consumer group’s letter to Dr Mulino notes Australian Financial Complaints Authority concerns about dispute volumes, with claim handling delays still a significant cause of dissatisfaction.

“ACIL is concerned that insufficient progress has been made in implementing the 86 recommendations of the flood inquiry or in finalising the long-awaited General Insurance Code of Practice review,” it said.

The group says it supports smarter and more efficient regulation but stresses the first step must be industry-led improvement in behaviour, accountability and communication.

“Regulation is a response to conduct that fails community standards, not an arbitrary burden,” Mr Shandiman said.

“The real solution lies in better behaviour and better regulation – not simply less regulation.”