How have you seen the insurance industry evolve since the massive impact of the 2011 floods? Is it somehow a better industry for that tough period?
Following the 2011 floods, the Government has undertaken a series of reforms to make flood insurance simpler and more effective.
The Government has enacted Regulations that give effect to the standard definition of flood to which all insurers must comply. This policy makes it easier for people to know what they are covered for - and what they are not covered for. If they have flood coverage, they now know that it covers events that fall within the terms of the standard definition.
The Government has enacted Regulations to require the provision of Key Facts Sheets for home building and home contents insurance policies. Providing consumers with easier access to key information, Key Facts Sheets will help ensure consumers are able to make more informed decisions about their insurance policies.
The Government has recently launched the National Flood Risk Information Portal to assist the community, planners and insurers to access important flood information about their local area. This Portal provides even more information for consumers and helps them make more informed choices. The Portal is part of the $12 million, four-year National Flood Risk Information Project initiated by the Australian Government in response to the Natural Disaster Insurance Review.
The Insurance Industry has also been improving its own flood information database to assist insurers to better assess a property’s flood risk.
After the devastating floods in 2011, the Government asked the Insurance Council of Australia to publish data on flood insurance take-up rates, on a state by state basis, setting out the number of policies that include flood cover. The number of policies which include flood insurance has increased significantly in recent years, from only 3 per cent in 2006 to an estimated 81 per cent today. The increasing take-up of flood cover is a sign that consumers are better informed about the availability of flood cover than ever before.
The Insurance Council has made some significant improvements to the General Insurance Code of Practice since the 2011 floods.
Since the 2011 floods, the National Insurance Broker's Association has developed an online tool for consumers to find a broker close to them. An insurance broker may be able to assist consumers to find insurance for flood coverage that best suits their needs.
How do you view the role of insurance brokers in the Australian market? Are there any changes afoot that could impact insurance brokers?
Insurance brokers play an important role in the Australian insurance market. Insurance brokers provide professional advice on and access to, both wholesale and retail insurance products. Being intermediaries, insurance brokers act on behalf of people seeking insurance and are responsible for obtaining cover appropriate to the needs of those people.
Last year the Government made two significant reforms to the Insurance Contracts Act, the introduction of a standard definition of flood and requirement for insurers to provide an Insurance Key Facts Sheet. These two reforms ensure that consumers have access to key information when making their insurance decisions.
In recognition of the fact that an insurance broker’s role is to assist their clients in securing appropriate insurance cover, insurance contracts entered into by consumers through insurance brokers are generally exempt from these reforms. The exemptions provided to insurance brokers recognise that insurance brokers are under a duty to determine what their clients insurance needs are and whether they want to be covered against flood when arranging insurance on their behalf.
Insurance brokers will also be subject to the FOFA reforms that commence on 1 July 2013. This includes the requirement to act in the best interests of the consumer and the ban on conflicted remuneration. These reforms will result in consumers being at less risk of receiving advice that is influenced by the payment of commissions.
However, in recognition of the different nature of insurance (as compared to an investment product) and the need to avoid introducing barriers to consumers obtaining adequate levels of insurance the application of these requirements have been modified in relation to insurance, and therefore this would extend to insurance brokers.
For example, an alternative best interests duty may be utilised by insurance brokers when advising on general insurance products. In addition, an exemption from the ban on conflicted remuneration has been provided for general insurance and life insurance products. The Government provided these concessions for insurance products to ease the burden on the industry to help address the problems of underinsurance.
While, it is important to recognise the role insurance brokers play in the insurance market, insurance brokers are only one of many options open to people when they are seeking information on or making decisions in respect to their insurance needs.
Do consumers fully understand the role of insurance brokers? Can more be done to raise awareness of the benefits of using an insurance broker?
While I believe that consumers generally understand what insurance brokers are consumers are not fully aware of the important role that insurance brokers play in the market.
In June last year the Government was pleased to see the National Insurance Brokers Association (NIBA) announce an enhanced service to provide advice to consumers through the establishment of a 1300 phone number and the enhancement of its ‘need a broker’ website. These enhanced services will enable consumers to access valuable information about insurance and what services a broker can provide. These initiatives are one way in which insurance brokers are raising consumer awareness in respect to the role that they play in the insurance market.
In addition to its work in raising consumer’s awareness of the benefits that insurance brokers may provide, NIBA has also recently released a revised Code of Practice, setting voluntary industry standards. NIBA has indicated that, after an extensive program to promote the Code, the Code will come into force from January 1, 2014.
What initiatives are you looking to spearhead in 2013?
Like all my Labor colleagues, I’ll be getting on with the business of promoting and standing for true Labor values. What I mean for example is the creation of jobs. What I mean is the support for a National Disability Insurance Scheme. What I mean is increasing people’s superannuation benefits so that they have more money when they retire. What I mean about true Labor values is making sure that we have better funded schools. What I mean about true Labor values is making sure that we have a strong economy.