Former Australian Competition & Consumer Commission (ACCC) chair Allan Fels has called for the ACCC to investigate the insurance sector over its recent hike in insurance premiums.
Speaking after three insurers reported a combined $1.3 billion in profits from Australian consumers in the February results season, Professor Fels expressed concern about competition in the insurance sector, which has ratchetted up premiums in recent years.
Fels contends that there is a lot of public discontent about premium increases and the fact that they greatly exceed the inflation rate.
“There is massive public discontent with the rise in insurance premiums and a deep concern they greatly exceed inflation”, Fels said.
“The price rises seem excessive in comparison with increases in costs and risks and seem exploitative of consumers and small businesses in particular”.
Current ACCC chair Gina Cass-Gottlieb “shares concerns broadly” around insurance affordability and pricing and said it would be up to the federal government to decide if it wants the ACCC to conduct a general price inquiry into the insurance sector.
“We certainly have been looking at areas adjacent to it and have a very close consideration of financial services”, she said.
“It would be a decision for the government as to whether to send us a direction to engage in further broader insurance inquiry”.
The December quarter CPI inflation data revealed that insurance premiums rose at their fastest pace since the HIH Insurance collapse at the turn of the century:
Indeed, insurance premiums are now the fastest growing component in the CPI basket.
The Australian Bureau of Statistics (ABS) explained that “higher reinsurance, natural disaster and claims costs contributed to higher premiums for house, home contents and motor vehicle insurance”.
The recent summer storms in Queensland risk placing further upward pressure on insurance costs, potentially driving more families to cease their coverage.
Many insurance companies now require flood insurance to cover damage from both rainwater and river flooding, which can result in annual premiums of up to $15,000 for some homeowners.
The ACCC is currently investigating insurance pricing in Northern Australia, while a parliamentary inquiry is examining the sector’s responses to the 2022 floods.
The ACCC might as well investigate insurance premium pricing, at least for informational purposes. Although I doubt it will change anything policy-wise.
