NIBA CEO welcome

WHAT HAVE WE LEARNT?

The ACCC released its third and final report under its Northern Australia Insurance Inquiry between Christmas and New Year 2020. The final report follows three years of investigations into the availability and affordability of home, contents and strata insurance across the northern areas of Australia.

This was a three-year project, and two interim reports were published in December 2018 and December 2019. In order to undertake its work, the ACCC used statutory powers to gather extensive information from insurance companies operating in the regions.

NIBA met with ACCC officials on a number of occasions, including in Parliament House, Canberra, at a meeting that also included a number of members of parliament and government ministers. Working with insurance brokers based in north Queensland, we were able to provide first-hand accounts of “on the ground” experiences of the insurance markets. This is always far more informative than reams of data.

The ACCC report outlines a number of findings that were already common knowledge to insurance brokers servicing northern Australia, including –• Larger and more frequent claims are leading to rising costs for insurers; • This leads to northern Australia being an unprofitable market for insurers; • This has resulted in “unusual market dynamics”, and “soft competition”.

What was really worrying is the information regarding the level of uninsured and underinsured properties. Rates of noninsurance were reported as “significant” – and growing. It was no wonder many policyholders are using periodic payment opportunities.

Finally, the ACCC found it is time consuming to understand and compare insurance products, leading property owners to stay with their existing insurer.

All of this has been known to insurance brokers in the region for a number of years now, and in fact these issues were identified in the March 2016 report by the Northern Australia Insurance Premiums Taskforce.

INSURANCE BROKER COMMISSIONS

The ACCC repeated a recommendation contained in an earlier Interim Report, which called for the banning of “conflicted remuneration” in relation to general insurance retail products arranged by insurance brokers. In doing so, the ACCC noted the Royal Commission recommendation for general insurance arrangements to be reviewed by the government no later than December 2022 – the Federal Government has accepted this recommendation.

NIBA looks forward to the 2022 review of general insurance remuneration arrangements. We successfully argued in 2015 that the issues and concerns with commission structures in other areas of financial services do not apply to general insurance products, and in fact there was no evidence of poor client outcomes arising from inappropriate remuneration incentives.

Further, while insurance broking was within the scope of the Royal Commission into Misconduct in Banking and Financial Services, there was no evidence referred to by the commissioner of poor client outcomes as a result of insurance broking commissions. NIBA could not find any evidence of systemic poor outcomes in any of the Royal Commission’s published materials.

The critical thing at the present time, especially in northern Australia – and Far North Queensland in particular – is the need for property owners to have access to qualified, expert ADVICE on their general insurance needs and the products available to meet those needs. The need for advice is so important when the market is extremely difficult, which it has been and is likely to continue to be for the foreseeable future.

The simple expectation that commissions will be replaced by a fee for service arrangement has not enhanced community access to advice anywhere in the world. Changes to remuneration arrangements for financial planning and investment advice are seeing large numbers of financial planning advisers leave the industry, at a time when baby boomers are retiring and in need of good financial planning advice and support.

We also know from the Deloitte Access Economics Report that insurance brokers offer a wide range of benefits and value to clients at the present time. This is underpinned and supported by the commission arrangements that currently exist in the Australian market.

Where is the evidence that there is an actual problem with the current structures, and where are the client detriments that need remedial action? 

DALLAS BOOTH

Chief Executive Officer, NIBA