Right Size Regulation

Current challenges

1. Reactive policy development: The regulatory policy process in Australia is often reactive, rather than geared towards a longer-term consideration of consumer needs and market development.
2. Insufficient consumer testing: Significant reforms rarely include robust consumer testing to ensure they meet intended goals.
3. Limited industry consultation: Inadequate input from insurers leads to ineffective regulations that fail to address practical challenges.
4. Disproportionate impact on smaller institutions: Complex regulations place a heavier burden on smaller insurers, potentially reducing market competitiveness.
5. Resource constraints: The rapid pace of regulatory reforms over the past decade has strained industry resources.
6. Unclear reform pipeline: A lack of visibility on upcoming changes hampers insurers’ ability to plan effectively and allocate resources.

Recommendations

To improve the efficiency and predictability of Australia’s regulatory environment, the Insurance Council of Australia recommends government:

1. Coordinate across regulators and remove duplication across regulatory frameworks: Consolidate conflicting rules by structuring legislation more logically, with related rules and definitions grouped together – an approach consistent with ALRC’s principle “that the law should be clear, coherent, effective, and readily accessible”.
2. Streamline regulatory reporting with a “single touch” system: The current reporting framework is a primary source of operational inefficiency due to clustered deadlines and uncoordinated ad-hoc data requests. A “single touch” reporting system should be implemented through a consolidated, API-driven gateway, building on the Treasurer’s call to eliminate duplicative work.
3. Adopt outcome-focused, proportionate regulation: The regulatory framework should transition from prescriptive, process-based rules to principle-based frameworks that target clear outcomes.
4. Establish post-implementation reviews: Introduce a formal, transparent and integrated process for each regulator to systematically review their regulations after a set period of time post their implementation and on an ongoing periodic basis.
5. Design a future-ready regulation framework: New regulations should be designed for a digital economy, incorporating principles such as tech-neutrality to ensure regulations are future proof and adaptive to emerging technologies.
6. Improved consultation: Implement a minimum two-month consultation period for financial services legislation.
7. Policy principles: Develop clear principles for financial services regulation with input from the financial sector and the Council of Financial Regulators.
8. Support competition: Include the Australian Competition and Consumer Commission in the Council of Financial Regulators to introduce a stronger competition focus.
9. Data-driven strategies: In consultation with financial services sectors, create clear data strategies for regulators and policymakers, aligned with the Government’s framework.
10. Legislate a uniform definition of family violence and consider its implications in new regulations.