Government called on to address general insurance market failure
Government called on to address general insurance market failure | Insurance Business Australia
Insurance News
Government called on to address general insurance market failure
Impacts of market failure on consumers and businesses outlined
Insurance News
By
Roxanne Libatique
The Australian Consumers Insurance Lobby (ACIL), formerly known as the Northern Australia Insurance Lobby (NAIL), has called on Assistant Treasurer Stephen Jones MP to commission a comprehensive report or inquiry into market failure in the general insurance industry.
Market failure in insurance means consumers are unable to afford to take out insurance due to market forces of supply and demand.
In a statement, ACIL has raised concerns about the impacts of climate change and emerging risks – including cyberattacks – that exacerbate the challenges consumers face. It also outlined instances where consumers face excessive premiums for flood and bushfire insurance, with some home insurance premiums hitting $20,000 following the recent natural disasters.
Impacts of market failure
ACIL warned that being unable to address market failure in insurance could lead to the following consequences:
Cost of living pressure: Unaffordable insurance premiums significantly impact financially constrained individuals and businesses, in the worst case leaving them underinsured or uninsured;
Increased vulnerability: Inadequate or unavailable insurance coverage leaves individuals and businesses exposed to financial risks, undermining community resilience;
Inequity and social disparities: Market failure limits access to affordable insurance for individuals and communities facing higher risks, particularly those in disaster-prone areas;
Burden on government: Insufficient insurance coverage places a strain on government resources and safety nets as individuals and businesses turn to public assistance in times of financial distress; and
Reduced disaster resilience: Resilience: Market failure hampers recovery and resilience in disaster-prone areas, as inadequate coverage hinders rebuilding efforts and the ability to recover from losses.
ACIL advised the government to commission a report or inquiry focusing on market failure in the insurance industry – encompassing crucial areas such as identifying market failures, examining current challenges, recommending measures to reduce the impact of market failures, identifying emerging risks, and providing guidance for consumers, insurers, and the government on appropriate actions.
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