Breaking up is hard to do: the call for a separate insurance regulator in Australia27 February 2023
A significant restructuring of ASIC has recently been announced, which is set to involve the most notable overhaul of the organisation in the past 15 years. This announcement has revitalised commentary on potential remedies to the age-old complaint that the corporate watchdog is being asked to do too much with too little.
Former ASIC chairman, James Shipton, has been weighing in on this conversation. In a recent Australian Financial Review article (20 February 2023), Mr Shipton identifies six possible solutions to what he describes as the “structural and legislative issues that complicate ASIC’s work”.
One of the solutions included in Mr Shipton's list was the implementation of a separate regulator specifically for the insurance sector.
The regulation of insurance in Australia is a task currently shared between ASIC and APRA. However, there are concerns that this fragmentation of responsibility may be causing inefficient and inconsistent oversight. Despite the examples set by other jurisdictions, Australia has yet to create a separate insurance regulator.
The idea appears to be an attractive one and would help alleviate ASIC of some of its regulatory burden. This path would allow ASIC to focus more closely on investigating and enforcing misconduct across other areas of the financial sector (which was a major focus of the Hayne Royal Commission).
The insurance sector is a complex area, and not an easy one to regulate. However, given superannuation is vital to each and every Australian, it is important that steps are taken towards improving oversight and promoting consumer protection.
It has been suggested that a dedicated regulator would be better equipped to deal with the unique challenges associated with the area and assist with ensuring that insurers act in the best interest of their customers. On the other hand, the implementation of a new regulator would be costly, and some are concerned that it may only exacerbate regulatory fragmentation and duplication.
The question of how best to regulate the complex world of insurance will continue to be discussed and debated here is Australia. It seems the proposal for a dedicated insurance regulator has ignited both excitement and apprehension, however for now it remains to be seen whether this idea will become a reality.