The Insurance Council of Australia (ICA) has put forward a five-point strategy in response to the Productivity Commission’s interim reports, outlining targeted reforms to improve efficiency and resilience within the insurance industry.
The submission covers a range of issues, including tax policy, climate adaptation, digital innovation, workforce flexibility, and healthcare investment, while cautioning against the implementation of a net cash flow tax (NCFT).
The ICA’s recommendations begin with a call for comprehensive tax reform. The council argues that the proposed NCFT would be difficult to implement for insurers, whose financial results are closely tied to the frequency and severity of natural disasters.
Instead, the ICA suggests that the government address inefficiencies in the current tax framework, such as state-imposed stamp duties and the New South Wales Emergency Services Levy. These levies can significantly increase insurance premiums, sometimes by as much as 30% on top of the GST.
The ICA advocates for a reduction in the corporate tax rate for all businesses, alongside efforts to harmonise regulatory oversight through the Council of Financial Regulators.
The second pillar of the ICA’s plan focuses on the growing financial impact of extreme weather events.
Since 2010, insurance claims related to natural disasters have reached $34 billion, with a marked increase in recent years.
The ICA recommends establishing a national database to track climate risks, introducing standardised home resilience ratings, and creating a $30.15 billion fund to bolster flood defences.
The council notes that 1.4 million properties are exposed to flood risk, with a significant proportion located in lower-income communities.
Digital transformation is another key focus. The ICA proposes that existing legal structures be used to regulate artificial intelligence, rather than introducing new regulations.
Streamlining data access and adopting outcomes-based privacy rules are also recommended to reduce compliance complexity and improve operational efficiency.
To address workforce challenges, the ICA’s fourth pillar suggests simplifying the process for recognising prior skills and removing unnecessary licensing requirements.
The council believes these changes could shorten recruitment periods and support labour mobility, particularly during periods of disaster recovery.
The final pillar calls for greater investment in preventive healthcare, especially in mental health.
The ICA supports a National Prevention Investment Framework, arguing that early intervention can reduce both healthcare costs and insurance claims.
The council highlights that mental health issues result in longer absences from work compared to physical injuries, contributing to higher costs for employers and insurers alike.
Kylie Macfarlane, ICA deputy CEO, addressed the sector’s ongoing challenges.
“As the industry that provides financial protection when things go wrong, we see firsthand how red tape, skills shortages, and poor climate planning slow down economic recovery and create the biggest barriers to productivity,” she said.
She noted statistics highlighting the issue – since 2010, insurance payouts for natural catastrophes have reached $34 billion. Mental health-related absences average 30 weeks, significantly longer than the six-week average for physical injuries, and regulatory requirements are estimated to cost the economy $68 billion each year.
“Our recommendations show how working together across different areas can deliver real productivity gains, while measures like the net cash flow tax would undermine these benefits by reducing the money available for productive investment,” Macfarlane said.
The ICA’s full submissions to the Productivity Commission are available for further review.
