One of Australia’s largest law firms has called for the prudential regulation of insurance to be carried out by a single regulator.
Minter Ellison told the Financial System Inquiry (FSI) that the “significantly” different regulatory frameworks and governing acts between life, general, and private health insurance should be reconsidered.
“In particular, private health insurers are regulated by a different regulator (the Private Health Insurance Administration Council) than general and life insurers (the Australian Prudential Regulatory Authority),” the submission said. “Given both regulators perform a similar role; we submit that the Inquiry should consider whether all prudential regulation of insurance should come under one regulator.”
There also remains a crossover between the types of insurance provided by general and life insurance companies, such as the similarity between sickness and accident cover and disability cover, Minter Ellison said.
The submission stated that artificial restrictions on the types of expenses that life companies can reimburse not only restricts innovation and efficiency in that industry, but it also impedes the ability of life companies to offer rehabilitation benefits to encourage customers to return to work.
This would not only benefit the life company and the customer, but also society by reducing burden on taxpayers, it said.
A suggested alternative would be to adopt a single insurance licensing regime with authorisations and capital requirements set as appropriate for the product lines offered by the particular insurance company.
“While regulation is a necessary cost of business to ensure an efficient and fair market for services and products, we don’t believe there has been sufficient focus on facilitating innovation, efficiency and competition for the future," said Richard Batten, Minter Ellison's financial regulation partner.
The submission also said that Australia should be prepared to permit insurance companies authorised by recognised overseas insurance regulators to operate in Australia without having to seek a separate APRA authorisation, as long as it was on a reciprocal basis.