The National Insurance Brokers Association (NIBA) has welcomed the Insurance Council of Australia (ICA) review of the insurance sector’s options for reforms to improve its contribution to national economic recovery and growth, amid concern from insurers, stakeholders and the community about the availability and affordability of some categories of cover for certain groups of customers.
NIBA CEO Dallas Booth said, “I have spoken with ICA CEO Andrew Hall and with John Trowbridge and have indicated to both the difficulties brokers are facing in the market at the present time, and the fact that there are a number of sectors struggling to get any cover at all. It is reassuring to see the Insurance Council taking this matter very seriously, and I look forward to the Consultation Paper that is currently being prepared.”
The aim of this review, which is being led by former insurance executive and regulator John Trowbridge in collaboration with leading economist Michael Blythe, is to provide a summary of practical solutions to problems that have been challenging sectors of the economy for a decade or more.
ICA CEO Andrew Hall said insurance exists to transfer risk from consumers and businesses in a manner that enables them to pursue their affairs confident they will receive support to recover financially from any insured risks.
“As our nation navigates the COVID economic recovery, it’s important to understand that nothing can happen without insurance providing essential coverage for insurable risks,” Hall said.
“NIBA will support this project with all available information and assistance,” Booth added.
Hall said, “While changes in availability or affordability of insurance send a price signal about the risks that are present, we know that where there are acute issues we need to find ways forward so economic prosperity is not hindered or risk shifted back on those without the capacity to properly manage it.”
“That is why the Insurance Council has engaged industry expert John Trowbridge and leading economist Michael Blythe to undertake this important review and recommend ways forward for the industry and policy makers.”
Trowbridge said that while the issues around affordability and availability were well known, there has been a lack of agreement on potential solutions.
“As has been recognised by the recent Royal Commission into National Natural Disaster Arrangements, the ACCC Northern Australia Insurance Inquiry, and Australian Small Business and Family Enterprise Ombudsman’s report, some of these issues can be addressed with industry initiatives or regulatory reforms, but some may be beyond the ability of the private insurance industry to resolve on its own,” Trowbridge said.
“The consultation paper will review various potential solutions and flag questions for policy makers, stakeholders and the industry to consider in order to move these important issues forward.”
Engagement with stakeholders has started and a consultation paper will be released in March, and a final report including recommendations is expected to be released mid-year.
Terms of reference for the review
- Examine the role of the private insurance market in promoting economic recovery and growth
- Identify insurance market segments and market situations where affordability and/or availability are seen to be important issues
- Explore which of those segments and situations can be ameliorated or rectified through initiatives taken by insurers, either individually or collectively
- Identify which segments and situations are not reasonably insurable in the context of community and government expectations of affordability and availability
- Identify principles and potential solutions which will overcome the current market shortcomings, so as to serve the community better without imposing obligations on insurers that they cannot meet, or that may cause them to withdraw from the market or to fail
- Consider how best to approach scenarios where insurance protections become unaffordable or unavailable due to market limitations
- Suggest initiatives that the industry and governments might take that would overcome market limitations, serve the insuring community better and support government policymaking in the interests of our society and the economy.