The insurance broking industry has hit back at Professor Allan Fels’ calls for more transparency in insurance premium pricing.
Currently serving as the Victorian Fire Services Levy Monitor, Fels last week released a report declaring consumers were in the dark about how premiums are priced and calling for more openness and competition in the industry.
“Insurance companies in Australia are more profitable than banks and this suggests an absence of effective competition,” he says.
“One of the things that would help drive effective competition is for consumers to be better informed.”
Fels says consumers should be able to easily determine whether their property has been assessed as low, medium, high or very high for risks such as flood, bushfire and burglary, as well as the reasons for any premium increases.
“Informed consumers would bring about a more level playing field in insurance,” he says.
However, NIBA CEO Dallas Booth says there are very few other areas in which product suppliers or manufacturers are required to offer their customers a breakdown of their costs.
“When you buy an airline ticket, you’re not told how much each part of the operation costs,” he says. “You’re told the taxes and the overall price, which is all consumers want to know.”
“If more information is added to the mix, it’s inevitable that people will be even more confused than they are now.”
Booth says it is now widely acknowledged by corporate regulators here and overseas that product disclosure does not work.
“It does not result in people making more responsible or more informed decisions,” he says.
“If people are unsure about the terms of the policy or the price behind it they should seek advice from an independent expert and that is a broker.”