ACIL warns ACCC: Industry-led insurance definitions pose significant reputational risk for regulator

The Australian Consumers Insurance Lobby (ACIL) has warned that the ACCC faces a significant reputational risk if it approves the Insurance Council of Australia’s (ICA) application to coordinate industry-wide standard definitions for key home insurance terms.

ACIL confirmed it supports the standardisation of insurance definitions, but strongly opposes the process being led by the insurance industry itself.

To view ACIL's submission follow the below link:

Submission to ACCC - ICA Authorisation Application Maintenance Wear Tear Definitions.pdf

Download PDF • 625KB

Tyrone Shandiman, Chairperson of the Australian Consumers Insurance Lobby, said the distinction is critical:

“We support standardising definitions in insurance. Inconsistent wording is a major driver of consumer confusion and disputes.  But this cannot be led by the industry. These definitions go directly to whether claims are paid or denied.”

The ICA is seeking ACCC authorisation to allow insurers to collaborate on definitions such as “reasonable steps to maintain” and “wear and tear”.

Shandiman said these are not neutral terms. “These definitions sit at the heart of claim denials. Small changes in wording can have a significant impact on outcomes for consumers.”

ACIL raised concerns that the ACCC may not be equipped to fully assess the real-world impact of the proposal.

“The insurance industry has deep technical expertise in how these terms operate in practice. Based on our experience engaging with the industry across multiple government inquiries and related processes, we do not have confidence that an industry-led process will prioritise the interests of consumers over those of insurers.  Without independent review of equal capability, there is a real risk the ACCC is being asked to approve something it cannot fully interrogate.”

The organisation also warned that the proposal could be exploited by poor industry practices.

“Most insurers want to do the right thing. But there are bad actors in this industry. Those actors will use any ambiguity to minimise claims. If these definitions carry ACCC approval, they will rely on that endorsement to justify outcomes that are technically arguable but unfair.”

ACIL said this creates a direct risk for the regulator.  “There is a real risk the ACCC is seen as endorsing the very framework being used to deny claims. That exposes the regulator to ongoing reputational damage.”

ACIL is calling for standard definitions to be developed independently.

• Definitions should be developed by Treasury or ASIC, not industry

• An independent expert review should assess consumer impacts before implementation

“If standardisation is done properly, it will improve outcomes and reduce disputes. If it is done poorly, it risks entrenching the very problems it is trying to fix.”