CEO / Welcome
TWO MAJOR REVIEWS UNDER WAY
A
s we go to print, NIBA is finalising responses to two major consultations of critical importance to the general insurance industry in Australia in 2021.
Insurance Council of Australia Consultation Paper
In May 2021 the Insurance Council of Australia (ICA) released a Consultation Paper on the Role of the Private Insurance Market – Independent Strategic Review: Commercial Insurance. The Consultation Paper was prepared by independent consultants John Trowbridge and Michael Blythe and was commissioned by the ICA – as part of its review of the insurance sector’s options for reforms to improve the industry’s contribution to national economic recovery and growth. Its primary emphasis is concern from insurers, other stakeholders and the community about the availability and affordability of some categories of insurance cover for certain groups of customers. Availability and affordability issues are certainly well known to insurance brokers at the present time. I have been discussing these matters with John Trowbridge for many months now, and I do have to give credit to the Insurance Council for commissioning the work, and to John Trowbridge for asking hard questions and listening carefully to often hard responses. The NIBA Board of Directors met with John to discuss these matters and to provide feedback on his draft recommendations. The Consultation Paper provides a brief overview of the economic importance of general insurance to the Australian economy. In his opening summary, Michael Blythe points out: There is a long running relationship between economic activity and insurance. At its essence is the management of risk that allows businesses, individuals and governments to take those risks. The result is higher than otherwise income, productivity and living standards. This framework is available to support the Australian economy over the medium term. As insurance brokers know only too well, very little commercial activity takes place in Australia without the support of risk transfer and insurance. Insurance is therefore critically important for the post-COVID-19 recovery of the Australian economy. Blythe goes on to note issues regarding affordability and availability in general, with particular problems being experienced with professional indemnity, public liability, business interruption, and directors & officers’ insurance. Again, insurance brokers are very familiar with these issues in the current market environment. The Consultation Paper develops a number of options for comment by interested stakeholders, including options around awareness, possible insurance industry initiatives, and possible government and government-related activity.
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These matters, and the ideas raised in the Consultation Paper, are important for domestic and commercial clients across Australia. By the time this edition is published, the time for providing responses to the ICA will have closed, however I urge all insurance brokers to continue to follow developments closely, and to continue to provide comments to the ICA on the issues raised in the paper.
Federal Government Consultation Paper: Reinsurance pool for cyclones and related flood damage
Also, in May 2021 the Federal Government published a Consultation Paper seeking feedback on the design and operation of a reinsurance pool to offer greater protection to residential, strata and small business property owners across Northern Australia. The cyclone reinsurance pool is intended to commence on 1 July 2022 and will be backed by a $10 billion government guarantee. It is expected over 500,000 property insurance policies will benefit from the pool’s coverage, and that insurance premiums across northern Australia reduce by over $1.5 billion over 10 years. Federal Treasury has formed a taskforce to develop the final design of the reinsurance pool in close consultation with the insurance industry. NIBA has met with the Treasury taskforce and has nominated two insurance brokers from northern Queensland to assist with the analysis and testing of options. We believe it is important that the government has access to technical expertise on these matters from brokers who are very familiar with the issues and challenges faced by clients across northern Australia every day. NIBA will continue to provide information to members as these two important projects progress.
DALLAS BOOTH Chief Executive Officer, NIBA
