Insurance in Australia

Insurance in Australia

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Australia has a sophisticated and well-developed insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

 market, which can be divided into roughly three components: life insurance
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...

, general insurance
General insurance
General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and...

 and health insurance
Health insurance
Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is...

. 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.

Life insurance


Life insurance
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...

 products sold in Australia include term life insurance
Term life insurance
Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or...

, disability income insurance
Disability insurance
Disability Insurance, often called DI or disability income insurance, is a form of insurance that insures the beneficiary's earned income against the risk that a disability will make working uncomfortable , painful , or impossible...

. Australian insurers are unusual in providing a lump sum Total and Permanent Disability insurance. Life insurers also sell superannuation
Superannuation in Australia
Superannuation is a retirement program in Australia. It has a compulsory element whereby employers are required by law to pay an additional amount based on a proportion of an employee's salaries and wages into a complying superannuation fund.An individual's superannuation fund can be accessed...

 investment products.

Life insurers


Some of the life insurance companies which operate in Australia are:
  • AIA Australia
  • AMP Limited
    AMP Limited
    AMP Limited is an Australian financial corporation. It operates primarily in Australia and New Zealand. AMP formed in 1849 as the Australian Mutual Provident Society, a non-profit life insurance company. In 1998 it was demutualised and listed on the Australian and New Zealand stock exchanges...

  • AXA
    AXA
    AXA S.A. is a French global insurance group headquartered in the 8th arrondissement of Paris. AXA is a conglomerate of independently run businesses, operated according to the laws and regulations of many different countries. The AXA group of companies engage in life, health and other forms of...

  • Asteron Life (Suncorp)
  • Allianz Australia
  • MLC
    MLC Limited
    MLC is an Australian asset and wealth management company, which was acquired by the National Australia Bank . It provides investment, superannuation, insurance and private wealth services to corporate and institutional customers....

  • Macquarie Life
    Macquarie Group
    Macquarie Group Limited is a global investment banking and diversified financial services group, providing banking, financial, advisory, investment and funds management services to institutional, corporate and retail clients and counterparties around the world...

  • OnePath (ANZ)
  • TAL
    TAL
    -Abbreviation:*TAL effector, a family of DNA binding proteins with high sequence specificity*Ralph M. Calhoun Memorial Airport , in Tanana, Alaska*The Alberta Library*The programming languages:**Typed assembly language...

     (previously Tower Australia)
  • Zurich Australia
    Zurich Financial Services
    Zurich Financial Services AG is a major financial services group based in Zurich, Switzerland.-History:The Company was founded in 1872 as subsidiary of the Schweiz Marine Insurance Company under the name Versicherung Verein...


In addition, life insurance is also sold by friendly societies and credit unions.

General insurance


General insurance
General insurance
General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and...

 products sold in the Australian market can roughly be divided into two classes:
  • Liability insurance
    Liability insurance
    Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy...

     such as Compulsory Third Party (CTP) motor insurance, worker's compensation, professional indemnity insurance and public liability
    Public liability
    Public liability is part of the law of tort which focuses on civil wrongs. An applicant usually sues the respondent under common law based on negligence and/or damages...

     insurance, business insurance;
  • Property insurance
    Property insurance
    Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance. Property is insured in two main...

     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.

General insurers


The three large general insurer groups are:
  • Insurance Australia Group
    Insurance Australia Group
    Insurance Australia Group Limited is an Australian publicly-listed company with its shares traded on the Australian Stock Exchange as ....

     (which includes NRMA, RACV, CGU, SGIO)
  • Suncorp (which includes AAMI, GIO, APIA, Just Car, Bingle)
  • QBE Insurance
    QBE Insurance
    QBE Insurance Group Limited is an Australian based general insurance provider, providing insurance services mainly to the Asia Pacific region, but also America and Europe . It has offices in 45 countries...



Other insurers are:
  • Allianz Australia
  • Hollard Insurance (which includes Real Insurance,Guardian Insurance, Aussie, Australian Seniors)
  • Budget Direct (which includes Virgin Money, Australia Post)
  • Wesfarmers (which includes Coles)
  • Calliden Insurance
  • Zurich Insurance
  • Youi Insurance
  • Progressive Direct


Previous insurers include:
  • Promina Group
    Promina Group
    The Promina Group was an Australian and New Zealand Insurance company formerly listed on the Australian and New Zealand stock exchanges. It is now fully owned by Suncorp-Metway Limited.-History:...

     merged with Suncorp in 2007
  • SGIO
    SGIO
    SGIO is an insurance brand of Insurance Australia Group trading in Western Australia. Until 1986, it was also the name of the Queensland financial institution now known as Suncorp. It is the major sponsor of the West Coast Eagles.- External links :* *...

     and SGIC
    SGIC
    SGIC is an insurance brand of Insurance Australia Group trading in South Australia. It was formerly the State Government Insurance Commission, providing compulsory third party motor vehicle insurance....

     purchased by IAG
  • HIH Insurance
    HIH Insurance
    HIH Insurance was Australia's second largest insurance company. It was placed into provisional liquidation on 15 March 2001. The demise of HIH is considered to be the largest corporate collapse in Australia's history, with liquidators estimating that HIH's losses totalled up to $5.3 billion...

     collapsed in 2001

Health Insurance


The Australian Government provides a basic universal health insurance, Medicare
Medicare (Australia)
Medicare is Australia's publicly funded universal health care system, operated by the government authority Medicare Australia. Medicare is intended to provide affordable treatment by doctors and in public hospitals for all resident citizens and permanent residents except for those on Norfolk Island...

. Private health insurance
Health insurance
Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is...

 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 $76,000 and do not have Private Health Insurance.

Industry structure


Life insurers were traditionally mutual
Mutual organization
A mutual, mutual organization, or mutual society is an organization based on the principle of mutuality. Unlike a true cooperative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship...

 companies, but in the 1980s and 1990s many of them demutualised
Demutualization
Demutualization is the process by which a customer-owned mutual organization or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form...

 and with a few large exceptions are owned by banks. The large remaining insurers have become “financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...

” organisations and now derive the majority of their revenue from superannuation
Superannuation in Australia
Superannuation is a retirement program in Australia. It has a compulsory element whereby employers are required by law to pay an additional amount based on a proportion of an employee's salaries and wages into a complying superannuation fund.An individual's superannuation fund can be accessed...

 investment products.

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 is owned by the Australian government.

Regulation

See main article Australian insurance law
Australian insurance law
Australian insurance law is a term which refers to the body of law which regulates the insurance industry and insurance contracts within Australia. Commonwealth Parliament gains authority to make laws with respect to insurance and insurance companies under section 51 XIV and XX of the Australian...



The prudential aspects of general and life insurance (solvency etc.) are regulated by the Australian Prudential Regulatory Authority (APRA). Matters relating to advice or disclosure of insurance products sold are regulated by the Australian Securities and Investments Commission
Australian Securities and Investments Commission
The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...

 (ASIC). The Australian Competition and Consumer Commission
Australian Competition and Consumer Commission
The Australian Competition and Consumer Commission is an independent authority of the Australia government. It was established in 1995 with the amalgamation of the Australian Trade Practices Commission and the Prices Surveillance Authority to administer the Trade Practices Act 1974...

 (ACCC) also has a regulatory role with respect to competition law
Competition law
Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies....

.

In certain states, various bodies also have powers in regulating certain types of statutory insurance. For example, in New South Wales
New South Wales
New South Wales is a state of :Australia, located in the east of the country. It is bordered by Queensland, Victoria and South Australia to the north, south and west respectively. To the east, the state is bordered by the Tasman Sea, which forms part of the Pacific Ocean. New South Wales...

 the Motor Accidents Authority http://www.maa.nsw.gov.au/ 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)http://www.phiac.gov.au/.

The primary federal legislation is:
  • 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
    Corporations Act 2001
    The Corporations Act 2001 , sometimes referred to just as the Corporations Act , is an act of the Commonwealth of Australia that sets out the laws dealing with business entities in Australia at federal and interstate level...

     ((especially Ch 7) consumer protection in respect of insurance policies)
  • Insurance Contracts Act 1984 (consumer protection in respect of insurance policies)

Industry bodies


The main industry bodies are:
  • Insurance Council of Australia http://www.insurancecouncil.com.au/ 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 http://www.acord.org 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.

See also

  • Financial system in Australia
    Financial system in Australia
    The Australian financial system has several sectors:* Banks, credit unions and building societies* Insurance * Superannuation* Financial markets—debt, equity and derivative markets...

  • Insurance
    Insurance
    In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

  • Australian insurance law
    Australian insurance law
    Australian insurance law is a term which refers to the body of law which regulates the insurance industry and insurance contracts within Australia. Commonwealth Parliament gains authority to make laws with respect to insurance and insurance companies under section 51 XIV and XX of the Australian...

  • Margin on Services
    Margin on Services
    Margin on Services, also referred to as "MoS", is the financial reporting method developed by the Australian Accounting Standards Board which relates to life insurance companies in Australia....

     (accounting method for life insurance in Australia)
  • Superannuation in Australia
    Superannuation in Australia
    Superannuation is a retirement program in Australia. It has a compulsory element whereby employers are required by law to pay an additional amount based on a proportion of an employee's salaries and wages into a complying superannuation fund.An individual's superannuation fund can be accessed...


External links