Insurance in Australia

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.

Types of insurance

Life insurance

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. 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.

General insurance

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.

Health Insurance

The Australian Government provides a basic universal health insurance, Medicare. Private health insurance in Australia is limited to those 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 1.5% Medicare levy, an additional 1% Medicare Levy Surcharge is payable by those taxpayers who earn more than $88,000 and do not have Private Health Insurance.

Industry structure

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).

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.

Regulation

The Insurance Act 1973 (Cth) requires minimum levels of capital and solvency for companies wanting to enter the insurance market and for insurers in the market.

Chapter 7 of the Corporations Act 2001 (Cth) regulates the way in which insurers and insurance agents and brokers carry on business and how they deal with the people they do business with and intend to do business with.

The Insurance Contracts Act 1984 applies to most insurance contracts with an Australian connection and is intended to ensure that a fair balance is struck between the interests of the insurer and the insured.

The prudential aspects of general and life 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.

Private health insurers are regulated by the Private Health Insurance Administration Council (PHIAC)

The primary federal legislations are :

• 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)

Industry bodies

• Insurance Council of Australia  which represents general insurers.
• Financial Services Council
• Australian and New Zealand Institute of Insurance and Finance
• Underwriting Agencies Council http://www.uac.org.au
• 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

See also

• Financial system in Australia
• Insurance
• Australian insurance law
• Margin on Services (accounting method for life insurance in Australia)
• Superannuation in Australia
• Australian and New Zealand Institute of Insurance and Finance (ANZIIF)