Forensic report: Budget’s insurance industry impacts
Forensic report: Budget’s insurance industry impacts | Insurance Business Australia
Insurance News
Forensic report: Budget’s insurance industry impacts
Indirect impacts from cost of living funding to tobacco tax
Insurance News
By
Daniel Wood
The first batch of federal budget documents consists of 1,000 pages divided into four separate documents. There’s also an additional Women’s Budget Statement, not to mention the treasurer’s speech, ministerial media releases and the additional Portfolio Budget Statements (PBS) from numerous government agencies.
When Insurance Business asked Dr Ian Enright (pictured above) if there was anything in the recent budget relevant to the insurance industry – IB didn’t know what it was asking.
Enright is founding chairman of the Australian College of Insurance Studies (ACIS). He is also a lawyer, academic author and company director.
As a general comment, he summed it all up as follows:
“Any temptation for structural change was likely removed by the size of the net government debt and the omnipresent fear of criticism of being poor money managers,” he said. “It is a cautious budget and is attracting criticism for it.”
Enright also said there was little in the budget of direct relevance to insurance customers or the insurance sector, “other than the macro factors in the economy that affect every industry.”
However, after examining this daunting collection of information, Enright pointed to initiatives that could have an indirect impact on the insurance industry, big or small.
Cost-of-living measures: minimal industry impact
He suggested that the cost-of-living measures worth $14.6 billion would affect the affordability and availability of insurance. However, Enright said any insurance industry impact will likely be minimal.
Enright explained the context for his conclusion: he observed that while the measures are expected to lower the poverty rate from around 13.6% to 13.3% of the population – lifting around 80,000 people out of poverty – living standards are set to go backwards, producing a so-called “per capita recession.”
A disappointing infrastructure program
“The budget infrastructure program highlights port development, urban renewal and urban development,” said Enright. “The program is dominated by funding for transport and for the Olympics and Paralympics.”
He said there is budget funding to improve emergency early warning systems. However, he suggested that the disaster resilience measures are disappointing.
“The Insurance Council of Australia (ICA) notes the budget’s commitment ‘to fund disaster resilience and measures to better protect Australian communities from extreme weather” and comments that: ‘insurance catastrophe claims costs from last year now hitting nearly $7 billion, much more will need to be done,’” he said.
Enright said there will be disappointment that the infrastructure program does not include more targeted infrastructure, capability or resilience to mitigate natural disasters.
Cyber help
“There is some funding to help small business build resilience to cyber threats by Council of Small Business Organisations Australia (COSBOA) training in-house cyber experts,” Enright said.
He said this is part of a five-year, $101.6 million funding package. This includes more than $19 million over the next 12 months to improve the security of critical infrastructure assets and help businesses respond to significant cyber attacks, he said.
Life insurance booster
“The tobacco excise is to be increased by 5% a year for three years, which will brighten the outlook for the life insurance sector,” Enright said. However, he said, this won’t have a substantial immediate impact on premiums or claims.
Easing the regulatory burden
Enright also noted the government’s commitment – that the ICA welcomed in its budget response – to introduce legislation to align tax law with accounting standards and minimise the regulatory burden on general insurers.
Pharmaceutical Benefits Scheme shake-up
Another initiative in the federal budget changed the Pharmaceutical Benefits Scheme (PBS).
The new medicine-dispensing timeline impacts more than 300 drugs and will allow Australians to buy 60 days’ worth of medicine for the price of a single prescription.
Carollo told IB he is concerned that the changes will have a negative economic impact on pharmacies, their insurance and the health industry.
More funding for disability insurance
The National Disability Insurance Agency (NDIA) welcomed the budget commitment to improving outcomes for National Disability Insurance Scheme (NDIS) participants and ensuring the scheme’s sustainability.
Do you think the recent Federal Budget will impact the insurance industry? Please tell us below
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