How your vote will affect your business
As the Federal Election looms, many insurance brokers are considering how their vote will impact their business. We speak to Shadow Minister for Financial Services and Superannuation Mathias Cormann about what the Coalition's policies will mean for the insurance industry.
Video transcript below:
Interviewer: Senator Mathias Corrmann, thanks for joining me. The coalition last year supported a petition against rising property insurance rates in Queensland. Can you tell me where you are in terms of finding a policy solution to that?
Senator Mathias Cormann, Shadow Minister for Financial Services and Superannuation
Senator Mathias Cormann: Well Tony Abott has asked me to chair a coalition working group to find policy solutions in relation to the, to address the dramatically increasing cost of insurance, in particular in places like Central and North Queensland. Obviously what’s been happening in the context of natural disasters in recent years, the costs and the availability of insurance have both been problems. And we find increases in the cost of insurance of 4-500% in places like North Queensland and that of course can have significant consequences. I mean it means that a number of people, who just can’t afford insurance decide not to take it out, which has consequences in terms of their capacity to maintain a mortgage, because mortgages of course have with it a requirement that your property is properly insured. Look there is a whole range of areas that we have been pursuing. I am working closely with people like Warren Entsch who is the member in Leichhardt North of Queensland and Ewen Jones who is member for Townsville and George Christensen who is a member up in North Queensland as well and we are sort of looking through a range of proposals at the moment, talking a lot with the Insurance Council in particular to explore some of the policy ideas we have. I mean ultimately we have got to make sure that insurance remains affordable and accessible, by the same token obviously there is a recognition that if you’ve got increasing risk given that insurance is a transfer of risk, that is going to be somehow reflected in premium. So there is a range of things we have got to do, we have got to find ways of better managing the risk, mitigating the risk, so that that puts down the pressure on premiums and that obviously involves co-operation between federal, state and local government, but there is also a range of things that we have got in mind in relation to insurance itself, but at this stage it really is a bit too early for me to talk about specifics because we are yet to take these proposals to Cabinet.
Interviewer: What is the coalition’s position on extending FOFA reforms to the insurance industry?
Senator Mathias Cormann: Well I mean the insurance industry has already been hit by the Future of Financial Advice (FOFA) changes and we’ve made the point for some time that some of these changes are counter productive, increase costs unnecessarily and actually don’t make things better to pay for the increasing costs. The changes are not as bad as where the government started because initially the government was going to ban commissions on risk insurance including life insurance inside superannuation altogether. We have always made the point that was a very dumb policy idea and the government sort of backed away from it. However, there are still some of the changes of the Future of Financial Advice changes are still impacting on the life insurance industry. My view is that obviously insuring for the event that something unexpected happens in your life and the financial implications that that can have for your families is a very important part of any financial strategy. I mean in focusing on ensuring that we maximise our financial health and well being and look after the interest of our loved ones, obviously life insurance is a very important tool, very important strategy and we do need to make sure that it continues to be available, accessible and affordable and that people can appropriately structure it if they so choose those arrangements through superannuation.
Interviewer: Insurance commissions have become a contentious issue with the FSC making call back extension proposals and the ISN calling for insurance commissions to be banned altogether. What’s the coalition’s position on that?
Senator Mathias Cormann: Well we don’t support the proposal to ban commissions on risk insurance. At the end of the day, commissions are one payment method and the key here really is that commissions are transparent and that the person paying the commission knows what they are paying, what they are paying it for and can make some informed decisions. At the end of the day, if a service is provided it’s got to be paid for and the commissions based structure is one way of paying for service that’s received. I mean in other jurisdictions, in the United Kingdom for example, they’ve gone down the path of wanting to ban commissions on risk insurance and they back tracked very quickly because it had very counter productive, negative unintended consequences. In Australia we already have an underinsurance problem. Insurance generally is a bit of a grudge purchase, unless you actually have like an incentive, an inbuilt incentive in the way the insurance is put to potential clients for the person that’s actually selling the insurance. Then you know I think that problem is going to become worse and that’s certainly been the evidence overseas. I mean even the current government has backed away from the initial proposals to ban commissions on insurance and we don’t think it’s something that we should pursue.
Interviewer: What are some of the policies you would introduce to support small business if you are elected to government in September?
Senator Mathias Cormann: The biggest thing we will do is that we will be very serious about cutting red tape. Over the last 5 years, the current government has introduced more than 21,000 new pieces of regulations and that is a lot of additional bureaucrats who are out there making life harder for small business. I mean every bit of additional paperwork that a small business operator has to fill out means it’s less time they can spend on doing what they do best, which is, you know pursue their business objectives. So we will run a full frontal attack on red tape to the point where we want to achieve about one billion dollars worth of savings per annum for small business from cutting red tape for small businesses and other businesses from cutting red tape. And of course the other thing that we have focused on is where we want to be a government that manages the economy well, that manages the budget well, which lives within its means, so we can actually deliver lower taxes and less red tape and all of these things that help to grow the economy more strongly. If the economy grows more strongly, that of course improves opportunity for small business. In particular we will be cutting the carbon tax, we will be getting rid of the carbon tax, which is one of the significant impost the current government has added to small business.
Minister for Financial Services and Superannuation Bill Shorten was invited to be interviewed, but declined the offer.