The Australian Competition and Consumer Commission (ACCC) has released its second Northern Australia Insurance Inquiry report.
This inquiry update finalises 13 recommendations proposed in the Inquiry’s first interim report, released in December 2018. These recommendations are aimed at boosting price transparency and consumer choice in northern Australia, whose residents pay considerably higher premiums for home, contents and strata insurance.
The ACCC has recommended the Australian Government consider a national home insurance comparison website, to provide consumers with clear information about their choices and to
support competition between insurers. Insurance companies would be required to participate in the website.
NIBA CEO Dallas Booth has indicated that the brokers’ association will continue to work with the ACCC to ensure they have a detailed understanding of the nature of the insurance markets in northern Australia, and in Far North Queensland in particular.
He said, “There are very real issues with the availability and affordability of property insurance across northern Australia, and the creation of a national comparison web site and a number of the other measures recommended by the ACCC will not improve the situation being faced by consumers, property owners and businesses. The market is also very dynamic, with changes happening almost by the week.”
“NIBA is committed to continue working with the ACCC to understand the problems facing consumers in the north, and to identify and develop proposals that could genuinely improve the position in those markets.”
ACCC Deputy Chair Delia Rickard said, “Our recommendations aim to give consumers the clear, simple information they need to make these crucial decisions about their insurance cover.”
In July 2017, the ACCC commenced an inquiry into the supply of residential, contents and strata insurance in northern Australia, following direction from the Australian Government.
The ACCC released an update report in June 2018 and an interim report in December 2018.
The first interim report found consumers paid much higher premiums in northern Australia, and that most insurers operated at a loss in the region during the past decade. The latest recommendations complement the 15 recommendations contained in the Inquiry’s first interim report, such as abolishing stamp duty on insurance products, banning conflicted remuneration for insurance brokers, making products more comparable and applying unfair contract terms protections to insurance products.
“We continue to call on the insurance sector and all levels of government to work together to adopt our recommendations which, if implemented, would make a real difference to insurance
customers not only in northern Australia, but around the country,” Rickard said.
A second interim report is due to the Treasurer by 30 November 2019 and a final report by 30 November 2020. The current report suggests that consumers should be given the right to choose how their home insurance claim is settled, either through a repair or rebuild managed by the insurer; or through a cash payment (after receiving appropriate warnings about the risks of taking a cash settlement). This right should be legislated through changes to the Insurance Contracts Act.
“We believe consumers should have the right to choose how their claims are settled,” Rickard said. The ACCC has recommended consumers be provided with more useful and clear information about insurance products, for example on the premium costs or savings that will stem from optional inclusions or exclusions.
“Insurers should also provide more guidance to consumers on mitigation measures that have been undertaken on properties with similar characteristics, and a guide to the premium
reductions that have resulted from doing so. This will give consumers more reliable and practical information on their options to reduce risks,” Rickard said.
Other recommendations include that the minimum time for consumers to be provided with a renewal notice before a policy expires to be extended from 14 days to 28 days to encourage
shopping around, and for measures to help consumers consider the costs of insuring a property before they buy it. The ACCC has also proposed that strata managers be paid only by their body
corporates, and not accept payment from insurance brokers or insurance companies when they arrange strata insurance.
The report also highlights the Inquiry’s progress on its five focus areas for 2019. The Inquiry’s main focus for 2019 is to consider policy measures that could have the potential to
achieve real and meaningful change for northern Australian communities. The Inquiry is currently considering ideas to improve insurance affordability and availability from Australia and
overseas, and whether they could be applied in northern Australia.
In addition, the Inquiry is examining insurers’ use of premium adjustments in northern Australia, and considering what barriers exist to insurers expanding in or re-entering the northern
Australian insurance market. The full list of recommendations can be found in the report.