Insurer risk culture and the sector’s community standing should be improved by the Hayne royal commission, ratings agencies S&P and Fitch say.
“Australian insurers are likely to face short-term challenges as they address recommendations,” Fitch says. “But successful implementation should be credit-positive for insurers in the long term.”
Both major political parties have indicated willingness to adopt almost all the commission’s 76 recommendations, but S&P says implementation “could be nuanced”.
A likely May election will also cause delays.
Leader of the House of Representatives Christopher Pyne says there will be no Parliamentary sittings extension to deal with the report, because it would take time to draft about 40 different pieces of legislation involved in a full response.
“We won’t be calling the Parliament back for another two weeks of feverish, rushed lawmaking for something that’s far too important for political stunts,” he told the ABC yesterday.
S&P says stronger governance and sales and claims oversight for insurers should benefit consumers and enhance the industry’s reputation.
“We do not foresee a significant change in the stable industry structure, including the dominant market positions of the four major Australian banks or across the insurance sector,” it says.
The Insurance Council of Australia (ICA) supports the aim of recommendations that directly relate to the industry and the regulation of financial services.
“Several recommendations, including those relating to add-on insurance and unfair contract terms, are already being addressed by the industry and ASIC,” it says.
“ICA also supports removing the exemption of the handling and settlement of insurance claims from the definition of a financial service. It looks forward to further consultation on the design and implementation of this and other recommendations.”
The Hayne report will also be reflected in ICA’s revised Code of Practice, to be launched “in several months”.