Competition authority calls for market reform in northern AustraliaDecember 19 2018 by InsuranceAsia News Staff
Australia’s competition watchdog has proposed scrapping stamp duty on insurance products, banning commissions for insurance brokers and removing unfair contract terms placed on insurance products in northern Australia, as part of reforms towards improving insurance affordability.
According to the new report from Australia’s Competition Consumer Commission, a range of complex issues are affecting home, contents and strata insurance markets in northern Australia, meaning residents and property owners are paying much higher premiums than is the case elsewhere in Australia.
The report found not only are insurance premiums considerably higher in northern Australia, they have risen at a faster rate, shooting up 130% in real terms between 2008 and 2018, compared to an average 50% rise in the rest of the country.
Extreme weather in northern Australia and the cost of servicing this sparsely populated area are partly to blame for the high premiums, but other factors have contributed, including moves by insurers to assess risk and set premiums at an individual address level, rather than pool risks across regions.
The inquiry found insurers are not actively trying to win market share in some high-risk areas, but are instead seeking to deter customers and limit their exposure by raising premiums, leading to soft competition. Markets at the regional level are also highly concentrated.
The commission has made a total of 15 draft recommendations it is seeking feedback on by April 12. These also include the establishment of a national insurance comparison website, restricting commission payments by insurers and intermediaries to strata managers, and the need for insurers to clearly state what discounts customers can get if they modify their home to mitigate their risks.
In preparing the report, the commission used its information-gathering powers to obtain documents and data from insurers about their operations in northern Australia. The watchdog analysed about six million data points providing aggregated information on insurers’ policies, premiums and claims over the past 11 years.
The Australian Securities and Investment Commission has also recently recommended banning commissions on general insurance products.
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