The Federal Government’s novel approach to tackling housing insurance affordability issues in North Queensland continued this week with the unveiling of ASIC’s home insurance comparison website. Replete with disclaimers and emphasising product features over policy price, the website is intended to aid consumer understanding and decrease underinsurance in a market struggling under flood and wind exposure. The website is one pillar of the Government’s response to a perceived insurance crisis in the region; the other being the relaxation of licencing laws and allowing unauthorised foreign insurers (UFIs) to sell policies if they offer consumers a substantially better price. Both measures have been subject to widespread criticism.
It’s an odd decision by the Government to enter a private market in the manner it has. Regulation of market participants and conduct is one thing; but by establishing its own comparison website, ASIC is now effectively competing with other privately operated online aggregators. While there was no doubt a genuine desire to assist consumers in North Queensland obtain the insurance cover they need, it is unclear how the website will assist, or even whether consumers will favour the Government’s website, over other options.
What the ASIC website does do, is evidence the standard that ASIC might expect from aggregators and perhaps for the direct distribution of insurance using the web in general. One can assume that the website represents “best practice”, and so provides proper disclosure, identification of key features and unbiased comparison. Aggregators and online distributors should take note!
The question remains as to whether the website will aid consumers, or whether, regardless of the way the information has been presented, consumers will continue to seek the cheapest option. In any event, perhaps having now engaged to some degree in insurance intermediation, ASIC will have a greater appreciation of the regulatory challenges that exist in retail distribution of insurance products.
It’s probably not surprising that other jurisdictions have shied away from this type of market intrusion and instead have attempted to regulate the conduct of the aggregators. In the UK, the Competition and Markets Authority (CMA) has been reviewing analogous issues in the private motor insurance market. As our London office reported the measures taken by the CMA are mostly regulatory in nature, including requiring aggregators to provide additional information to consumers, submit compliance statements to the CMA and make changes to the most favoured nation clauses.
UFIs welcome in North Queensland
Even more contentious is the Government’s decision to relax licencing requirements and allow UFIs to underwrite home insurance in North Queensland. Having set such a high prudential standard for insurers in Australia, and having been lauded internationally for withstanding the GFC because of that strong approach, this move has been perceived as a knee-jerk reaction. A Federal Parliamentary inquiry has recently questioned the protection available for consumers buying house and contents cover from UFIs and both APRA and ASIC have evidenced dislike of the policy shift.
Whether these initiatives prove effective for consumers in North Queensland waits to be seen. In the meantime, we expect the measures to remain under the close scrutiny of the insurance carrier, intermediary and aggregator markets.
For further information please contact Matt Ellis.