The Insurance Council of Australia (ICA) has called for an urgent reduction in regulatory "red tape" and a modernisation of liability frameworks, warning that the cumulative cost of compliance and "social inflation" is increasingly threatening the affordability of small business insurance.
In a landmark submission to the Parliamentary Joint Committee on Corporations and Financial Services, the industry body revealed that the general insurance sector now operates under a staggering framework of more than 30,000 discrete obligations enforced by upwards of 25 different regulators.
The ICA estimates that this regulatory burden costs the Australian industry up to $3.5 billion annually.
The submission, authored by ICA CEO Andrew Hall, argues that while a robust regulatory framework is essential for consumer protection, the current landscape is riddled with duplication.
"This regulatory framework contains multiple instances of duplication and overlapping regulation, which add consumer costs without providing a meaningful benefit," the ICA stated. The industry body is now urging the Federal Government to streamline these instruments to help alleviate the upward pressure on premiums for Small and Medium Enterprises (SMEs).
Beyond domestic regulation, the ICA highlighted the growing impact of "social inflation"—the trend of insurance claim costs rising faster than standard economic drivers.
The report points to shifting societal attitudes toward personal responsibility and more aggressive legal strategies as key drivers of this trend. This has led to what the ICA describes as "courts broadening liability beyond original policy intent," directly impacting the cost of public liability and professional indemnity lines.
"Australia is experiencing a period of legal and litigation cost inflation," the submission noted, citing data from the Australian Prudential Regulation Authority (APRA). These changes are resulting in more costly legal proceedings and higher compensation payouts, which are ultimately passed on to small business owners through higher premiums.
The ICA also took aim at state-based "insurance taxes," which it identified as the second-largest component of premium costs after peril risk
In the 2024-25 financial year, state governments collected $8.9 billion in insurance taxes-a figure $1.6 billion higher than the entire industry’s cumulative profits for the same period. The council has reiterated its long-standing call for the abolition of insurance stamp duty, citing a 2015 Deloitte study which suggested replacing these taxes with municipal rates could boost private consumption by $5.5 billion annually.
Additionally, the submission highlighted several other "areas for action" to support the sector:
The submission is the first in a series the ICA intends to provide to the inquiry, with subsequent papers set to focus on specific lines including cyber, public liability, and professional indemnity insurance.
