Regulatory burdens risk affordability issues: ICA
Cumbersome and overcomplex regulation risks limiting competition, stifling innovation and raising premiums for consumers, while processes to introduce changes are often reactive, the Insurance Council of Australia (ICA) has warned a parliamentary inquiry.
“With respect to the affordability of insurance products in the context of escalating cost of living pressures, the government and regulators should be mindful of the impact of additional regulation, and ensure regulation is both necessary and efficient,” ICA says in a submission.
The House of Representatives Standing Committee on Economics is holding an inquiry into promoting economic dynamism, competition and business formation. Some 30 submissions have been lodged and public hearings will be held next month.
ICA says regulation is necessary to protect the financial system and consumers, but unnecessary complexity increases the cost of doing business, hinders innovation and disproportionately impacts smaller market participants and new entrants.
As an example, it says insurers must meet different breach reporting standards and timeliness across the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority, the Insurance Code Governance Committee, the Australian Financial Complaints Authority, the Australian Communications and Media Authority and the Office of the Australian Information Commissioner.
Opportunities exist to simplify obligations across the regulators, potentially through a single reporting framework and ICA would welcome the opportunity to collaborate with Government on mapping the environment for insurers, it says.
“Cumulative regulation imposes significant operating costs on the insurance industry which are ultimately passed onto customers through higher premiums,” it says. “Similarly, industry funded regulatory schemes create business costs which are reflected in premiums.”
The submission says schemes that subsidise “poor actors” in other financial industries are particularly unfair on insurance policy holders.
ICA welcomes a simplification review being completed by the Australian Law Reform Commission and also work underway to modernise the prudential architecture, but calls for further action.
“Our experience is that the policy process is often reactive, rather than geared towards a longer-term consideration of consumer needs and market development,” it says. “The Insurance Council would welcome a more structured process for engaging in the policy dialogue and more rigorous testing of policy proposals to ensure that the intended outcome for consumers is actually achieved.”
The submission reiterates ICA’s call for a financial regulators forum that could assist with planning and preparation by providing a pipeline of upcoming consultations and changes.
The grouping could be modelled on the UK Financial Services Regulatory Initiatives Forum, or the existing Council of Financial Regulators could be leveraged for the purpose, it says.
The extent and speed of reforms since the Hayne royal commission has required significant compliance investment, at the same time as resource planning and deployment is required to drive innovation, it says. Insurance, and other industries, also face acute staffing pressures, ICA notes.
The submission is available here.
