Reducing regulation and taking mitigation action are priorities when tackling insurance costs, ahead of any forced break-up of companies, Liberal senator Andrew Bragg told a pre-election breakfast today. 

“We would look only to that extreme measure [divestment] if there were ongoing failings in the sector – it’s not the first tool you take out of the bag,” he told the National Insurance Brokers Association event in Sydney. “It would not be our preference to ever have that on our list of legislation.”

Senator Bragg said a Coalition government would want to work with the industry on reducing costs, starting with deregulation, and with mitigation part of the conversation.

“Deregulation is about finding regulation that retards investment and increases cost to consumers and then stripping that out, but it’s got to be done in a way which isn’t going to erode consumer protections,” he said.

Senator Bragg was critical of Labor’s plan to expand a scheme allowing first home buyers to access loans with a 5% deposit, saying it would “crowd out and ultimately destroy” the lenders’ mortgage insurance sector.

Speakers at the sold-out breakfast included Assistant Treasurer and Financial Services Minister Stephen Jones, who is not seeking re-election for Labor, and independent MP for Warringah in NSW Zali Steggall.

Mr Jones said while there are “a bunch of things” the politicians disagree on, “there’s one thing we really do agree on and that’s the centrality of insurance in directing economic activity throughout the economy, and the importance of the affordability of insurance, not just to a household but also to businesses small and large”.

Rising premiums have been driven by reinsurance expenses, high building material and labour costs, and natural disaster risk factors, plus the long tail of covid, he said.

“No industry, by the way, wants to have a line item in the CPI [consumer price index] figures,” he said. “For the past couple of years, the insurance industry has, and that has been as a result of a perfect storm of factors, no pun intended, that have been visited upon the industry.”

The country must stop doing “dumb things”, he said. Issues such as improved land use need to be a focus for the future, and risks affecting properties must be declared up front.

“We cannot expect that we’re going to have a meaningful impact on insurance affordability when we are flooding the pool of insured properties with high-risk housing – in areas that we know, at the point that we are putting a For Sale sign on the block, that this property is going to flood,” he said.

Mr Jones highlighted a government and industry delegation early in his ministerial term that spoke with global reinsurers about risks and mitigation, and said he hopes his successor repeats this.

Ms Steggall told the breakfast she is proposing a $10 billion climate resilience fund to strengthen infrastructure, and she wants the National Construction Code updated to keep communities safe amid rising risks.

“I can see we have a massive risk on the horizon that we’re simply not addressing,” she said. “Our political system is not taking it and giving it the seriousness and the focus it absolutely should have.”

The event also included a wrap-up panel discussion featuring Mick Veitch and Leigh Moran, directors at advisory group Counsel House.

From the latest Insurance News magazine: The challenges facing the next federal government, and the industry's plan to tackle them