The Insurance Council of Australia (ICA), which represents non-life insurers Down Under, has said that the Financial System Inquiry (FSI) must focus on more efficient industry regulation, less restrictive prudential requirements and significant tax reform to improve the insurance sector’s contribution to Australia’s economy.
ICA also said that an excessive emphasis on prudential supervision can impact on insurance market efficiency and consumer prices. The submission emphasises the importance to the efficiency of the financial system of allowing insurers to price to risk.
The trade body argued that governments should not intervene with policies that lead to the mis-pricing of insurance and the distortion of market efficiency.
It urged a level playing field in regulation, including mandatory disclosure applying equally to aggregators as to directly licensed financial entities such as insurers. The FSI would be well placed to insist upon requirements to disclose commissions and payments payable when products are featured on comparison platforms, it said.
“The insurance sector has the potential to bear more risk in the economy but the current regulatory and prudential settings are preventing insurers from taking on this risk or new risk,” ICA CEO Mr Rob Whelan said.
“With the right settings – such as relaxing prudential demands, reducing duplication between government regulators and taking away the drag on efficiency by eliminating taxes on insurance – insurance businesses can intermediate more risk.”