15 July 2014

ICA welcomes Financial System Inquiry opportunities

The Insurance Council of Australia (ICA) today welcomed the release of the Financial System Inquiry interim report and the opportunity to provide further evidence to support improvements to Australia’s financial system.

ICA CEO Rob Whelan said: “The Financial System Inquiry interim report has taken into account the ICA’s submission on behalf of general insurers, and little fine-tuning is required. We conclude that with the appropriate regulatory and policy settings, a greater allocation of risk can be intermediated through general insurance, including that risk currently borne by governments.

“The ICA notes the FSI report has identified specific matters for the general insurance industry: the role of aggregator businesses in the insurance market; opening government statutory schemes to competition; and levels of insurance.

“The ICA will consult its members on aggregator issues. It notes the FSI report has identified the potentially detrimental tradeoffs involved when consumers shop only on price using price comparison websites.

“In the ICA’s view, consumers are much better off being helped to understand their risks, and then to identify the insurance products with the features that best satisfy those requirements.

“By providing information that is more easily accessible and understood, the ICA and its members are empowering consumers to make better decisions about their individual insurance needs.”

Mr Whelan said the ICA believed consumers and governments would benefit if statutory schemes in each state and territory were opened up to greater competition from the private sector, as outlined in the ICA’s submission in June to the Competition Policy Review.

He said the FSI interim report remarked on the growing trend towards risk-based pricing and the principle that the price paid for insurance reflected the risk. The report acknowledged the importance of these price signals to consumers, including the potential for risk minimisation.

“This report reinforces the long-term value of investments by governments in permanent infrastructure to protect communities from natural catastrophes and extreme weather,” he said.

Mr Whelan said the ICA was particularly interested in assisting the FSI to understand industry initiatives that tackle insurance literacy.

““The ICA is actively engaged on many measures to help empower consumers and address underinsurance and non-insurance. These include a consumer financial literacy initiative and property resilience awareness programs. It welcomes the FSI’s focus on this area.”

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