Announcement date
26 October 2022
Link to announcement
https://ministers.treasury.gov.au/ministers/stephen-jones-2022/media-releases/landmark-funding-help-reduce-insurance-costs
Problem being addressed
Insurance costs reflect underlying risk. As natural disaster risks rise, insurance costs rise. As costs rise, coverage decreases, leading to increasing harm to consumers and increasing costs that will be borne by governments across welfare, health and emergency management systems. However, data on insurance affordability and coverage is poor, meaning the scope and scale of issues cannot be easily identified, policy interventions are harder to target, and change cannot be as easily evaluated. Additionally, understanding and comparing insurance policies can be difficult for consumers given their complexity, which can result in underinsurance and complicate the claims process.
Proposal
The Australian Competition and Consumer Commission Northern Australian Insurance inquiry and the Royal Commission into National Natural Disaster Arrangements outline options including:
- Better data on affordability and coverage - build an enduring dataset on insurance coverage and affordability to better inform policy and decision making and measure impacts over time.
- Review standard insurance definitions and the standard cover regime - investigate standardising natural hazard definitions (e.g., ‘storm surge’) in insurance and review the standard cover regime to improve consumer product choice.
- Targeted mitigation funding - invest more in resilience/mitigation projects to reduce risk, targeted to areas that are most prone to natural hazard risk and/or have the most significant insurance issues.
- Improved engagement between the public sector and insurers - establish institutional arrangements to promote cooperation between government and the insurance industry on issues and solutions across the public and private sector.
Assessed RIS outcome
Independent review
Assessment comments
Consistent with the Government's Regulation Impact Statement (RIS) requirements the Australian Competition and Consumer Commission Northern Australian Insurance inquiry and the Royal Commission into National Natural Disaster Arrangements have been certified by the Department of the Treasury as meeting the requirements of a RIS, The OBPR does not assess the quality of independent reviews and RIS-like documents used in lieu of a RIS, but does assess whether the options analysed in the independent review are relevant to the regulatory proposal. The OBPR assessed that the options analysed in the independent review are sufficiently relevant to the regulatory proposal.
Regulatory burden
The Department of the Treasury estimates an increase in regulatory costs of $0.7 million per year, averaged over ten years.