Operational Impact on Insurers – Federal Government Response to Senate Committee Report
On 20 December 2017, the Federal Government issued its response to the Senate Economics References Committee report on Australia’s general insurance industry.
The Report made 15 recommendations on a range of issues, including the transparency of pricing, disclosure and competition in the general insurance industry.
If the recommendations are implemented then the proposals have the potential to impact on pricing, cover and disclosure processes deployed by insurers and brokers, in particular:
|Item||Proposal||Likely Operational Impact|
|Premium Pricing||Amend the product disclosure regime in the Corporations Act to improve transparency.
|Disclose previous year’s premium on insurance renewal notices.
Explain premium increases when a request is received from a policyholder.
|A review of component pricing and establish a disclosure framework under the Corporations Act.
|Disclosure of component pricing of premiums to policyholders upon their taking out or renewing an insurance policy.|
|Cover||A review of the current standard cover regime.
|Potential changes to the current disclosure regime for standard cover.|
|Government consultation with industry and consumers to develop and implement standardised definitions of key terms for general insurance.
|Potential changes to scope of the definition of key terms under general insurance policies.|
|Legislative amendments to remove the current exemption for general insurers under the laws applying to unfair contract terms.
|General insurance policies will be subject to the laws applying to unfair contract terms.|
|Product Disclosure||A review of the utility of Key Facts Sheets as a method of product disclosure in improving consumer understanding of home building and contents policies and to other forms of general insurance.
|Potential introduction of Key Facts Sheets as part of the sales process for home building and contents insurance and other general insurance products.|
|Legislative amendment mandating compliance with the ACCC’s good practice guidance for general insurance comparison website operators and suppliers.
|General insurers to comply with ACCC regulations and guidelines for comparison websites.|
|Insurance Broker Remuneration||Introduction of legislation to require all insurance intermediaries to disclose component pricing payable to strata managers on strata insurance quotations.
|For strata insurance quotations – brokers to disclose component pricing and commissions payable to strata managers.|
A copy of the Federal Government Response can be found at: https://treasury.gov.au/publication/p2017-t248756/
For guidance on the implications of the Response please contact Meridian’s Financial Services Principal Michael Bracken.