At the request of the Royal Commission, this paper discusses recent and prospective reforms affecting the general and life insurance sectors. Many of the reforms enhance ASIC’s oversight and capacity to intervene in the industry.
Insurance plays an important role within the Australian economy by enabling individuals, firms or other bodies to seek protection against financial losses or adverse events. A well-functioning insurance sector contributes to the appropriate allocation of risks domestically and internationally. More broadly insurance contributes to the availability of financing to enterprises and households; can encourage innovation and longer-term planning; and contributes to financial market efficiency through reducing the cost of uncertain events.
In Australia the insurance market is segmented between general insurance, comprising personal and commercial lines, and life insurance, comprising risk products (including death, disability and income protection) and investment products. There is also a reinsurance market which provides insurance to the insurers.
The regulatory framework for general and life insurance is similar to that of the banking sector, with financial soundness being regulated by the Australian Prudential Regulation Authority (APRA), and products, disclosure and conduct by the Australian Securities and Investments Commission (ASIC).