Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise to speak on the Economics References Committee's report Australia's general insurance industry: sapping consumers of the will to compare. I will start by talking about consumers: everyday Australians who are making their contribution to this great country. I'm proud to say, as a Labor senator, that Labor will always put consumers front and centre. The economy needs to deliver for all Australians. Whether it's on the issue of tax, wages or consumer outcomes, Labor will make sure that the economy works for everyday Australians.

Insurance is a complicated matter. I'm glad that most people can access general insurance products that can protect their assets—things like the family home and the family car. However, as we've seen in this inquiry, consumers face difficulty when it comes to finding the right insurance product and for it to be offered at a fair price. The issues I want to talk about this evening are: the lack of protections for consumers when it comes to general insurance; accessing insurance in North Queensland, particularly for strata properties; the level of competition in the insurance sector; natural disaster mitigation arrangements; the merits of a comparison website; and lack of transparency when it comes to understanding an insurance policy.

First, on the issue of the lack of protections for consumers when it comes to general insurance. When it comes to a complex matter like insurance, it's important that everyday consumers are afforded the proper protections, that policies are explained well, that claims disputes are settled appropriately and that what is promised by insurers is fulfilled if a claim is lodged. This report outlines a number of recommendations, including a review of the outdated standard cover regime. Whilst I'm not looking to commoditise general insurance products, it is important that a standard insurance option that might provide a safety net, with well-understood protections and policies, be considered.

Second, on the issue of standard definitions. It's worth noting at this point that the current Leader of the Opposition, in his former capacity under the previous Labor government, did some very good work in standardising the definition of 'flood' in insurance products. It's about time that this work was continued, with issues like actions of the sea. It appears that industry and consumer groups are ready to act. We just need a government who can lead the conversation on this issue.

Third, on the issue of unfair contract terms. It's also well beyond time to remove the exclusion 'general insurance' from unfair contract terms. CHOICE, VCOSS, Consumer Action Law Centre and ASIC all support reform in this area. The duty of utmost good faith obligation does not provide sufficient protection. The general insurance industry should be brought to the same standards expected of the broader economy.

Fourth, on the issue of accessing insurance in North Queensland, particularly for strata properties. Anyone who spends time in North Queensland will know that insurance premiums are a big concern. The message continues to come through strongly in this inquiry, and our recommendations include the following: firstly, the government should release its response to the Northern Australia insurance premiums taskforce report. It is well beyond due. While the government waits, people in North Queensland still face the problem of high premiums. Secondly, the government should also strongly consider introducing legislation to require that all insurance intermediaries disclose component pricing, including commissions payable to strata managers on strata insurance quotations. There's work to do at all levels of government, but, as urban density increases, there will be more strata properties. Owners should be better informed about the commissions paid to the people in the chain, be it insurance brokers, strata managers and the like. It's a murky corner of the market that those involved don't want to talk about, and it's about time that action was taken.

We've also recommended that a review be taken to establish a fact base for the strata insurance market in North Queensland. And Ms Margaret Shaw has continued to provide evidence that it is difficult to obtain the right strata insurance in some areas and for particular types of properties. We need to move from anecdotal evidence to a broad fact base. If there are parts of the market where there is only one insurer, we need to look carefully about how that can be addressed.

On the issue of the level of competition in the insurance sector, when it comes to insurance, one issue that comes up regularly is whether there is sufficient competition. There are some major players who do form the majority of the market, sometimes through the use of different brands. There are different takes on whether competition is healthy in this sector or not. I tend to side with Professor Fels and Professor Cousins that, in many ways, competition is as healthy as it could be with a largely disengaged consumer population. The challenge is how to put the right information in the hands of consumers to improve competition. Three recommendations were made in light of this position. They are: to mandate the disclosure of the previous year's premium on insurance renewal notices, for insurers to explain the increase in premium if a request is received and to consider the disclosure of component pricing. It's all about putting the right information in people's hands.

On the issue of natural disaster mitigation arrangements, one important component of general insurance premiums for assets like houses is the risk of natural disaster events. Mitigation has to be part of the conversation. Groups such as the Productivity Commission as well as the insurance industry itself have called for a sensible discussion on how the federal and state governments could work together to increase mitigation funding to reduce the damage caused by future natural disasters. The response by the coalition government to the 2015 Productivity Commission report was underwhelming, to say the least. It's about time the federal government stepped up to the plate and led a national conversation on this issue.

On the issues of the merits of a comparison website, the major issue in this inquiry was whether an independent, government-run comparison website could empower consumers to get a better deal on their general insurance. It's a worthy goal. There were some good arguments put on both sides of this case. The evidence seems clear that we do need to find ways to better inform consumers of the different insurance products that are out there. In particular, Professors Fels and Cousins made strong arguments, based on work that's being done in New South Wales as well as international developments, that there is strong merit to a comparison website and for it to be independent. They also cautioned that it's important that people are aware of the website. It's no good having a great website if people don't know about it.

However, there were other concerns raised—particularly how such a website might drive consumers to compare primarily on price, which might lead consumers to take out policies that aren't as comprehensive as they should be and in addition have the effect of the hollowing out of policies. We've made a recommendation that government complete a detailed proposal for a government comparison website. The cost to establish and run the website, how the public will be engaged to use it, consumer testing through the life of the website, the structure of the information on the website and dealing with comparison issues such as price and product features should all be evaluated in the detailed proposal. That way the government of the day can make the best decision on this issue.

On the issue of lack of transparency, when it comes to understanding an insurance policy, almost every stakeholder we spoke to acknowledged that the current system of key fact sheets and product disclosure statements don't really serve consumers well.

CHOICE put it well when they talked about this system being developed at a time when it was assumed that the more information you throw at a person, the better informed they'll be, and they'll be better equipped to make more informed decisions. Respected journalist John Rolfe, who's following the general insurance issue and debate very closely, talked about some of the PDSs that are 30,000 words in length. That's hardly appropriate. Even the Insurance Council of Australia admitted that PDSs are lengthy, onerous documents to read. It's time to modernise this thinking. Behavioural biases are well understood in research now and it's incumbent on government and industry to work together to get some sensible outcomes.

In summary, general insurance is a complex area. This report makes sensible recommendations to strengthen consumer protections, improve competition, reform strata insurance and to revisit natural disaster mitigation funding. Adoption of these recommendations will help give ordinary Australians a better deal when it comes to insurance. I seek leave to continue my remarks later.

Leave granted; debate adjourned.

I present the report of the Senate Economics References Committee on the Australian dairy industry together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

I move:

That the Senate take note of the report.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.