(Re)Insurance & Regulation Focus - fortnight commencing 12 May

Key developments in the last fortnight

ICA recommends advancing Australia’s resilience post federal election

With the completion of the federal election on 3 May 2025, the Insurance Council of Australia (ICA) continues advocating for investment in disaster mitigation and resilience to reduce long term costs for insurers, policyholders and taxpayers, as the insurance industry warns that insurance affordability could continue to decline. The ICA released its election platform document earlier this year, making recommendation for the next Australian Government to enhance Australia’s resilience through prioritising long-term disaster resilience funding, improving building standards, and improving consumer awareness about disaster preparedness and supporting vulnerable customers. The ICA has also made recommendations previously focusing on addressing the issue of rising insurance premiums, including cutting insurance taxes and flood funding arrangements to cope with climate risks.

Federal Election Platform 2025

Zurich demands governments' attention on climate risks

Zurich has called on governments to prioritise climate resilience policies and work with the private sector to deal with the rising natural catastrophe losses. It recently produced a report titled ‘Climate Risks: Strategies for Building Resilience in a Volatile World’, warning that with the insured losses continuing to grow, premiums for climate risk coverage will have to increase in parallel, which may affect affordability and the overall Australian market. Zurich calls for a co-ordinated approach between private and public sectors, focusing on risk-based pricing, risk prevention and reduction strategies to enhance market accessibility and affordability through supportive policy frameworks and risk-sharing solutions. Other arrangements may include using technology and data to better understand risks and offer incentives for businesses to obtain adequate cover without overly regulating premiums.

Zurich urges public-private solution to climate risks

QBE urges state governments to cut insurance taxes

QBE calls for state governments to cut insurance taxes, as the insurance sector is experiencing escalating climate-related disaster costs with inflationary pressures continuing to drive up premiums. QBE believes that reducing insurance taxes is one of the few immediate levers available to maintain affordability for policyholders, noting that levies including stamp duty and emergency services levies can add 10%-30% to premium costs and affect low-income households disproportionately, especially for customers in flood or fire-prone areas. QBE reported $420 million in catastrophe claims from events including Queensland’s floods and Cyclone Alfred. It considers that without structural tax reform and meaningful investment in mitigation, the risks to households, businesses and the economy will continue to climb.

Insurance taxes too high, says QBE - announces disaster claims of $420 million

HCF Life fined for misleading contract term

The Federal Court has ordered that HCF Life Insurance Company Pty Limited pay a pecuniary penalty of $750,000 and make corrective disclosures on its website after the Court found that a pre-existing condition term in four HCF Life insurance policies was liable to mislead the public. ASIC warns insurers that this decision against HCF Life sends a clear message regarding their responsibility to ensure any information distributed to consumers is accurate and consistent with the law. Justice Jackman stated that consumers are entitled to regard PDS provisions as reliable and accurate information as to their cover under the policy, and this case has firmly establishes that contractual terms may mislead consumers if the operation of those terms are inconsistent with the provisions of the Insurance Contracts Act.

Federal Court fines HCF Life for misleading contract term, orders corrective disclosure

ASIC acts against Macquarie Bank for repeated compliance failures

ASIC has imposed additional conditions on Macquarie Bank Limited’s Australian Financial Services Licence after discovering multiple and significant compliance failures related to futures dealing and over-the-counter (OTC) derivatives trade reporting, which went undetected for many years. ASIC found that those failures were caused by ineffective supervision and weak compliance and control management. Control weaknesses ranged from poor change management practices, unclear roles and responsibilities, and a lack of understanding of its own processes and controls, including around data governance. Macquarie Bank’s extra licence conditions require preparation of a remediation plan to address the ongoing failures and their root causes, the appointment of an independent expert to review and prepare a report on the remediation plan and assess the operational effectiveness of the remediation activities to prevent, detect and respond to similar issues occurring in the future.

ASIC acts against Macquarie Bank for repeated compliance failures

Submissions supporting the call to end commissions

With the independent review of the National Insurance Brokers Association of Australia’s Insurance Brokers Code of Practice (Code) underway, the ACCC has made a submission against broker commissions as it believes that conflicted remuneration, such as broker commissions, disincentivise brokers to seek more affordable cover for clients or consider alternatives that pay lower commissions. Following the Quality of Advice Review recommendations, the Federal Government retained the exemption from the conflicted remuneration ban for general insurance brokers so long as they obtain consent to receive commissions where personal advice is provided to retail clients (which commences from 10 July 2025). As the focus on retail clients excludes many small businesses that require general insurance products, the Code Compliance Committee supports extending remuneration disclosure obligations beyond retail clients to small businesses and adopting AFCA’s definition of small business (i.e. an organisation with less than 100 staff).

ACCC doubles down on call to end commissions and Broker code ‘must protect small business clients’

Key dates

• 20 May 2025 – the Sparkes team are presenting at AILIA on CPS 230 and its impact on Delegated Authorities.
• *1 July 2025 – APRA prudential Standard CPS 230 commences.*
• 10 July 2025 – the new broker commission consent regime commences.

In case you missed it

The Sparkes team are presenting at AILA on CPS 230 and its impact on Delegated Authorities on 20 May 2025. Tickets are still available on the AILA website.