Insurance Costs Drivers are ‘Multifaceted’, Says Assistant Treasurer in his Address at the 2024 NIBA Convention
The Hon Stephen Jones MP, Assistant Treasurer and the Minister for Financial Services, delivered a Keynote Address to attending delegates at the 2024 NIBA Convention
The Hon Stephen Jones MP, Assistant Treasurer and the Minister for Financial Services, delivered a Keynote Address to attending delegates at the 2024 NIBA Convention on Tuesday, 22 October in Adelaide.
The Hon Stephen Jones MP, Assistant Treasurer and the Minister for Financial Services, delivered a Keynote Address to attending delegates at the 2024 NIBA Convention on Tuesday, 22 October in Adelaide.
The Minister focused on issues around insurance affordability and accessibility for all Australians, and noted how the rising costs of insurance is a result of a combination of complex factors.
“Insurance costs have risen over 16% in the last year. This is the biggest rise in over 20 years,” noted Minister Jones in his address.
With growing insurance costs and insurance unaffordability comes the increase in risk of underinsurance.
The Minister highlighted three big global drivers that are pushing up costs of insurance. The first driver is the Australian market being exposed to the global reinsurance market.
“The global increase in losses has driven higher reinsurance premiums for Australian insurers,” said Minister Jones. This is a cost which is then invariably passed on to the consumer.
Global supply chain issues, including the rising cost of materials and labour constraints is the second big driver.
The third bid driver highlighted by the Minister was a lack of considered planning when it comes to building houses.
“In many instances, planning frameworks allow people to build and rebuild houses in the wrong places.
“There are more people and assets in hazard-prone areas than ever before,” said Minister Jones.
Climate change is a ‘force multiplier’
Minister Jones called climate change a ‘force multiplier’, which exacerbates the adverse impact of the big three drivers above when it comes to insurance unaffordability.
“More and more communities are becoming affected by the long tail of climate change.
“As losses increase and more regions face higher risks of disaster, the costs of insurance will go up,” said Minister Jones.
The Minister stressed the importance of collaboration between government and industry, noting that "there's not going to be one silver bullet for us to deal with the affordability issue."
"We want to ensure that we get this right through sustainable reforms which ensure that households get a better result," noted the Minister.
Findings of the Parliamentary Inquiry into insurers’ response to 2022 floods
The Minister welcomed the final report of the Parliamentary Inquiry into insurers' response to the 2022 floods, which was handed down last Friday, outlining 86 recommendations.
“We will reflect on this report, seek advice on its recommendations, and respond in due course,” said Minister Jones.
No change in the government’s position on broker commissions
In the Q&A session held after the Minister’s address, he confirmed that the federal government was not considering a ban on broker commissions.
“We accepted the recommendations of the Quality of Advice Review and that’s been reflected in what we’ve done through the parliament. There’s been no change to our position,” clarified the Minister.
The Minister also confirmed that he’s looking to introduce exposure draft legislation for the next tranche of Quality of Advice Review legislation in the near future.