5 Insurance Updates You Need To Know

The recent announcement of the 2023 Federal Budget, IAG pricing penalties, and soaring insurance premiums are some of the recent stories we’ve seen cycling our news feeds over the past few weeks.

Federal Court decision awaited on IAG pricing promises penalty – Insurance News

ASIC and IAG have submitted a $40 million agreed penalty to the Federal Court regarding a case involving a failure to honour discount promises made to customers.

Justice Wendy Abraham heard the submissions and reserved judgment for a later date. The court will also decide how information about the penalty should be communicated to customers.

ASIC initiated civil penalty proceedings in October 2021, alleging that IAG subsidiary IAL engaged in deceptive conduct and made false representations to NRMA Insurance customers regarding home and motor policy renewal discounts.

The alleged failure affected at least 596,000 customers between March 2014 and November 2019, with promised discounts totalling approximately $60 million.

ASIC urged all general insurers to review their pricing systems and controls to prevent consumer harm. IAG self-reported the issue to the regulator in 2019, implemented a remediation program, provided refunds to affected customers, and apologised for the failure.

The company claimed to have improved its systems and processes.

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Disaster-hit retirement village residents query $5 million insurance limit – Miko Pagaduan, Insurance Business

Rivervue Retirement Village in Australia saw approximately 70 residents displaced after a flood in October 2022 damaged 45 villas beyond inhabitation and affected two others.

The village’s $5m flood insurance coverage was significantly below the estimated $86m worth of assets within the village, and policy documents obtained by ABC indicated that this was the case.

Concerns have been raised about the need for greater insurance transparency and accountability.

While Rivervue has pledged to cover the shortfall, concerns remain about the long-term financial implications for both residents and the future insurability of the property.

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Rural insurance premiums soar after climate disasters with contractors, farmers paying the price – Anna Conn, ABC News

Rural insurance costs in Australia have seen a significant rise due to an increase in natural disasters, a shrinking underwriter market, and the rising cost of goods.

Insurance premiums have gone up by 20 to 40 per cent, depending on the insurer.

Farmers and contractors are feeling the impact, with higher costs affecting their operations and profitability. For example, spray contractor Ben Burrell in New South Wales faced an annual insurance bill of over $55,000, prompting concerns about the affordability of coverage and the potential consequences of making claims.

The limited number of underwriters and inflationary pressures on machinery further compound the issue.

Farmers are encouraged to properly maintain their properties to have access to a wider choice of underwriters, and the affordability of insurance remains a challenge that the agricultural industry must address.

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Industry urged to look out for greenwashing risk as ASIC steps up surveillance – Insurance News

ASIC is cracking down on “greenwashing,” which is defined as misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

A recently released report detailed 35 interventions ASIC made in response to its greenwashing surveillance activities from July 2020 to March 2021.

Insurance providers have been urged to be vigilant of greenwashing as companies globally face growing pressure to adopt more pro-climate policies from activist shareholders and consumers.

Major domestic insurers in Australia have implemented sustainable investment programs, engaged in partnerships with the government and industry, and held themselves accountable to self-imposed climate change policies and targets.

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Federal budget: step in the right direction, but more needed – Insurance News

The federal budget delivered by Treasurer Jim Chalmers includes several measures that will impact the insurance industry.

These include the confirmation of $200 million for risk reduction projects under the Disaster Ready Fund, $236 million to improve flood forecasting and warnings, $46.5 million for cyber security, and tax law changes to reduce compliance costs for general insurers.

While welcomed by the Insurance Council of Australia and other industry bodies, they call for further investment and for states and territories to share the burden of funding resilience and mitigation projects.

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