Premium transparency reforms could support resilience aims but will be approached carefully, Financial Services Minister Daniel Mulino told the Insurance Council of Australia conference today.

Consumers want more transparency across financial services, and benefits include greater understanding of products and potentially improved resilience, he said.

“If there is a clearer sense of what’s driving premiums or what’s driving premium increases, I think there’s a greater possibility of that then being linked to people investing in risk-reducing activities,” he said.

Daniel Mulino at the ICA conference

“There’s a range of potential benefits from greater transparency, but I’m also conscious that we need to do it in a way where we don’t, in a sense, overprescribe any outcome because we want there to be innovation.”

Dr Mulino said he is approaching the issue with an open mind and wants to be highly collaborative with the insurance sector.

“We’re going to step through this very carefully,” he said. “It’s going to be a process where I’m very confident we can improve things in a way that both leads to greater transparency but I think also dovetails with some of the other policy agendas that we’re looking at, such as resilience.”

Related article: Home cover intervention a priority – but there’s no timescale, Mulino says

The federal budget in May included $2.4 million over two years for Treasury to consult on and develop options to improve clarity around the basis of home and contents premiums, and to legislate standard definitions for natural hazard terms.

Dr Mulino also told the conference work on insurance affordability issues affecting high-risk consumers is continuing, within principles including that action does not “totally remove price signals” and fits with resilience aims.

“A lot of consultation is going on, and now quite detailed consultation,” he said. “We’re now at the point where we’re looking at the data in a very detailed way, and so I do want to acknowledge the work that the industry has undertaken with Treasury and the Government Actuary.”

Detailed data is critical to understanding the problem and the best way forward, he said.

The consequences of greater risk assessment granularity – linked to home and contents affordability issues – are seen in other insurance markets, he added.

“We’ve seen this in life insurance, where we had to intervene in relation to genetic testing to try to soften the edges of individual information. That was something we managed to achieve with the full agreement of the health advocates, the legal advocates and the life insurance industry.”