Insurance in Australia: Difference between revisions

Australia's insurance market can be divided into roughly three components: life insurance, general insurance and health insurance. These markets are fairly distinct, with most larger insurers focusing on only one type, although in recent times several of these companies have broadened their scope into more general financial services, and have faced competition from banks and subsidiaries of foreign financial conglomerates. With services such as disability insurance, income protection and even funeral insurance, these insurance giants are stepping in to fill the gap where people may have otherwise been in need of a personal or signature loan from their financial institution.

Life insurance products sold in Australia include term life insurance and disability income insurance. Australian insurers are unusual in providing a lump sum Total and Permanent Disability insurance. Life insurers also sell superannuation investment products.^[1] Life insurance in Australia is sold through intermediaries (such as brokers) as well as direct to the consumer, in fact Australia is one of the leading countries when it comes to selling life insurance through direct channels.^[2]

Life insurance companies that operate in Australia include:^[3]

• AIA Australia, a subsidiary of Hong Kong based AIA Group, the largest public listed pan-Asian life insurance group.
• AAMI Life, a brand and subsidiary of Suncorp Group since 2007. Its headquarters are in Brisbane, Queensland.
• AMP Limited, a long-time Australian company, which has been demutualised and now is listed on the Australia Stock Exchange.
• AXA, since 30 March 2011, AXA Asia Pacific Holdings Limited and all of its Australian and New Zealand subsidiaries members of the AMP Group, previously they were members of the Global AXA Group.^[4]
• Asteron Life (Suncorp)
• NRMA Insurance
• Allianz Australia, part of Allianz, the world's largest insurance company, with headquarters in Munich, Germany.
• GIO Life
• MLC
• Macquarie Life
• OnePath (ANZ)
• Real Insurance
• TAL (previously Tower Australia)
• Zurich Australia

In addition, life insurance is also sold by friendly societies, credit unions, health funds and large retailers such as Coles Supermarkets and Woolworths Limited.

General insurance products sold in the Australian market can roughly be divided into two classes:

• Liability insurance such as Compulsory Third Party (CTP) motor insurance, worker's compensation, professional indemnity insurance and public liability insurance, business insurance;
• Property insurance such as Home and Contents insurance, travel insurance, and comprehensive motor vehicle insurance

Certain types of insurance, such as CTP and worker's compensation, are statutory (i.e. are required by law), and can differ considerably by state.

Large general insurer groups include:

• Insurance Australia Group (brands include: NRMA, RACV, CGU, SGIO, Buzz)
• Suncorp (brands include: AAMI, GIO, APIA, Just Car, Bingle, Vero, InsureMyRide, Shannons, CIL, Terri Scheer)
• QBE Insurance
• Auto & General (brands include: Budget Direct, Australia Post, Virgin Money, Compare the Market and they underwrite home and car insurance from 1Cover)
• Allianz Australia (brands include: Club Marine and Hunter Premium Funding, and they underwrite travel insurance from 1Cover)
• Hollard Insurance (brands include: Real Insurance, Guardian)

Previous insurers include:

• Promina Group merged with Suncorp in 2007
• SGIO and SGIC purchased by IAG
• HIH Insurance collapsed in 2001
• MMI taken over by Allianz in 1998

The Australian Government provides a basic universal health cover through the Medicare scheme. Private health insurance in Australia is limited to services not covered by Medicare or to services provided in private hospitals.

The Australian taxation system encourages middle to high income earners to take out private health insurance. While most taxpayers pay a 2% Medicare levy, an additional 1% to 1.5% Medicare Levy Surcharge is payable by high-income taxpayers who do not take out private health insurance.

Life insurers were traditionally mutual companies, but in the 1980s and 1990s many of them demutualised and with a few large exceptions are owned by banks. The large remaining insurers have become "financial services" organisations and now derive the majority of their revenue from superannuation investment products. There are four main distribution channels for life insurance, including group insurance, bank insurance, IFAs and direct channels (mainly through TV).^[5]

General Insurers have a more diverse ownership structure, with more stand alone independent general insurers (although some life insurers do own general insurers).

Health insurers are still predominantly mutuals. The notable exception is Medibank Private, the largest private health insurer in Australia, which was owned by the Government of Australia, but was privatised in 2014-15.

The prudential aspects of general, life and health insurance (solvency etc.) are regulated by the Australian Prudential Regulation Authority (APRA). Matters relating to advice or disclosure of insurance products sold are regulated by the Australian Securities and Investments Commission (ASIC). The Australian Competition and Consumer Commission (ACCC) also has a regulatory role with respect to competition law.

In certain states, various bodies also have powers in regulating certain types of statutory insurance. For example, in New South Wales the Motor Accidents Authority regulates Compulsory Third Party motor liability insurance. In many cases these bodies have powers regarding premium rating and reinsurance rules.

The primary federal legislation is:

• Life Insurance Act 1995 (Life Insurance prudential regulation)
• Insurance Act 1973 (General Insurance prudential regulation)
• Health Insurance Act 2007 (Health insurance prudential regulation and consumer protection)
• Corporations Act 2001 ((especially Ch 7) consumer protection in respect of insurance policies)
• Insurance Contracts Act 1984 (consumer protection in respect of insurance policies)

Other legislation which affects the industry includes:

• A Nex Tax System (Goods and Services Tax) Act 1999 (Taxation rules in respect to insurance e.g. Division 78)
• Privacy Act 1988 (The National Privacy Principles)

Further regulations include:

• The General Insurance Code of Practice which all general insurer signatories agree to self-regulate under.
• Payment Card Industry Data Security Standard (PCI DSS)

The main industry bodies are:

• Insurance Council of Australia which represents general insurers.
• Financial Services Council
• Australian and New Zealand Institute of Insurance and Finance
• Underwriting Agencies Council
• Institute of Actuaries of Australia
• ACORD which is the insurance industry global standards organisation. ACORD has standards for personal and commercial lines and has been working with the Australian General Insurers to develop those XML standards, standard applications for insurance, and certificates of currency.
• Australasian Institute of Chartered Loss Adjusters (AICLA) which represents qualified loss adjusters

• Financial system in Australia
• Australian insurance law
• Margin on Services (accounting method for life insurance in Australia)