The opposition leader, Peter Dutton, says the Coalition could seek to break up insurance companies found to be gouging policyholders and more competition is needed in the sector.
In an interview with Sky News on Sunday, Dutton said the Coalition’s divestiture policy – which threatens to carve apart big supermarkets and hardware chains as a “last resort” to combat price rip-offs – could also be applied to big insurers.
Recent flooding in north Queensland has again highlighted growing issues with property holders, particularly those in high risk areas, being unable to afford insurance or being under-insured for risks like flooding.
Experts say it has become increasingly difficult for properties in high risk areas to obtain affordable premiums.
Dutton said there were “a number of factors” that had caused premium increases including “mitigation issues” and reinsurance issues that were beyond Australian control.
“But we need competition,” Dutton said. “We need depth in the insurance pool, and we need to make sure that we’re not being ripped off by insurance companies.
“As we’ve done with the supermarkets, where we have threatened divestment, if consumers are being ripped off, similarly in the insurance market, we will intervene to make sure that consumers get a fair go.
“Because at the moment, people are paying too much for their insurance, and what’s resulting is that people aren’t taking out insurance, so that moral hazard … is created for a number of reasons, and people just simply can’t afford to insure their car or their home at the moment.”
Dutton’s plan to allow forcibly break-up large retailers had split senior Liberals, with some arguing at the time for a more holistic policy rather than a sector-by-sector approach.
The Australia Institute, a progressive thinktank, has said the introduction of a divestiture tool could help keep inflation down and ease cost-of-living pressures.
Australia’s supermarket chains have repeatedly denied their practices amount to price gouging.
The Australian insurance market is more complicated. While there are dozens of brands that offer home insurance policies, most are subsidiaries of four large insurers – AIG, Suncorp, Allianz and QBE – that combined account for about 75% of the market, according to consumer group Choice.
Andrew Hall, the chief executive officer of the Insurance Council of Australia, said Australia had a “very competitive” insurance market, with about 30 insurers offering home and motor vehicle cover.
“Insurance is already one of the most regulated industries in Australia,” Hall said.
“The Australian Competition and Consumer Commission is currently monitoring home insurance prices in northern Australia and in its most recent report found that insurers are passing on reductions brought about by the introduction of the cyclone reinsurance pool.”
Hall said insurers were “very aware” of the impact that inflation was having on the price of cover, including increased global reinsurance costs, and the rising cost of extreme weather events.
“The only sustainable way to address insurance affordability is to reduce or remove risks,” he said.
“This means investing in resilience-enhancing infrastructure, strengthening building stock and reforming land use planning, and requires significant investment from and collaboration with governments,” he said.
“Australia’s most densely populated areas on the east coast are exposed to our most expensive extreme weather events, a scenario that’s unlikely to change quickly.”
Hall said insurance premiums could be reduced by 10% to 30% by abolishing state insurance taxes.
“Insurance customers need to demand a better deal from state governments [which] collect more tax on insurance products than insurance companies make in profit,” he said.
