The insurance market in Australia is professional, mature, well regulated and very competitive.
A common attribute of all developed and modern countries is a robust and competitive insurance industry. Insurance is an enabler for government, businesses and individuals to invest in infrastructure and provide new products and services with confidence. Whilst all effort is made to minimise risk, ‘things happen’. We cannot eliminate risk, but we can transfer risk via an insurance vehicle.
Insurance is basically a financially means to transfer risk. Insurance companies invest these funds and pay claims when an unforeseen loss occurs.
The insurance market can be generally split into three core areas, life insurance, general insurance and health insurance.
General insurance products sold in Australia can be broadly classified into two categories: liability insurance and property insurance.
Liability insurance includes Compulsory Third Party (CTP) motor insurance, worker’s compensation, professional indemnity insurance, public/products liability insurance, directors and officers liability and fraud/crime insurance. Some of these insurance types, including CTP and worker’s compensation are required by law but are not uncommonly different from state to state.
Property insurance refers more to home and contents insurance, industrial special risks, travel insurance, aviation, agriculture, construction and comprehensive insurance for motor vehicles. Property insurance will include cover for natural perils and accidental loss.
Some of the major general insurance companies in Australia include Allianz, Insurance Australia Group (includes CGU), QBE Insurance, Suncorp/Vero Group, Wesfarmers, Zurich, AIG, and Lloyd’s.
Life insurance, disability income insurance and superannuation investment products are three of the life insurance products sold in Australia. One of the features that differentiate Australia and its approach to insurance from that of other countries is that some Australian insurers do offer a lump sum total and permanent disability insurance rather than payment received in installments.
AMP Limited, Allianz, banks are most prominent Australian life insurance companies. Friendly societies and credit unions are also providers of life insurance.
Medicare is the Australian Government’s basic universal health insurance. For Australians who wish for insurance to cover the services that are not part of Medicare or to receive services not provided through Medicare, private health insurance is purchased.
Through the Australian taxation system, private health insurance is encouraged for middle to high income earners. Most taxpayers are subject to a 1.5% Medicare Levy but an additional 1% Medicare Levy Surcharge is incurred by taxpayers earning more than $76,000 per annum who do not have their own private health insurance cover.
In Australia, the prudential aspects of insurance are overseen by the Australian Prudential Regulation Authority (APRA). APRA is responsible for setting and enforcing standards to ensure that the financial promises made by companies and institutions are complied with and that the financial system is stable, efficient and competitive. APRA is tasked with investigating any insurance company that they believe are failing to fulfil its promises and operate in a legitimate and professional way.
Insurance intermediaries such as insurance brokers are regulated by the Australian Securities and Investments Commission (ASIC).
In Australia, the well-developed insurance market responds to the huge demand for insurance products and services. Increasingly, insurance companies are seeing a rise in demand for products such as life insurance as Australians prepare for later years and put plans in place to care for their families after death or if injury was to occur. As a result of high value deals on offer, some companies are now sought after by international clients.
The regulation of the insurance industry in Australia has rendered insurance to be of a very good standard. This standard, coupled with the improved integrity of the industry, has resulted in quality insurance products for customers and oftentimes, has enabled customers to save money.
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