Productivity Commission in a panel forum to discuss the future of natural disaster funding.

The Productivity Commission will meet insurance industry leaders in a panel forum to discuss the future of natural disaster funding in Australia, the Australian and New Zealand Institute of Insurance and Finance (the Institute) has announced. The panel will follow the Commission’s preliminary report, which will be released this month.

Karen Chester, the Commissioner responsible for the public inquiry into Natural Disaster Funding, will participate in the event with representatives from insurers and the Insurance Council of Australia.

“A significant part of Australian insurance could be affected by recommendations coming from the Productivity Commission report. This is the industry’s opportunity to understand how natural disaster funding might change and, very importantly, to have its views on this very important subject heard by those who are advising the Federal Government,” said Prue Willsford, CEO of the Institute.

In 2014, the Australian Government asked the Productivity Commission to undertake a public inquiry into current national natural disaster funding arrangements, taking into account the role of and future of insurance, natural disaster mitigation and the reduction in the impact of disasters on communities.

The panel will include:

• Karen Chester – Commissioner, Productivity Commission
• Nicholas Scofield – General Manager, Corporate Affairs, Allianz Australia
• Karl Sullivan – Insurance Council of Australia
• Lisa Harrison – Executive General Manager, Customer Product and Pricing, Suncorp
• Stephen Brunker – MC / Host – Treaty Account Executive at Gen Re

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“The Productivity Commission has backed down from the strong pro-competition, pro-choice and pro-transparency position they took in their interim report and appear to have given in to pressure from the Minister for Financial Services and Superannuation, Bill Shorten,” said AFA President, Brad Fox. “The Productivity Commission set the industry up with high expectations only to let everyone, especially Australian workers, down.”

In August, Minister Shorten publicly supported a submission to the Productivity Commission compiled by two of his own departments – Treasury and the Department of Education, Employment and Workplace Relations – which advocated for the continued involvement of an expert panel with Fair Work Australia (FWA).

“We are very concerned about the influences on superannuation policy and we question, as we have previously, the appropriateness of FWA making decisions with respect to the selection of superannuation funds in modern awards,” Mr Fox said.  “FWA has been running the system to this point and it has not worked.”

Mr Fox said it is difficult for the superannuation industry to have confidence in FWA because there is a widely held view that FWA lacks independence.

“The expert panel will be dominated by FWA, it will be chaired by the FWA President and FWA will appoint the part time members. How can the industry have confidence in a solution that is back to the past and more importantly, how can workers have faith in superannuation?”

Mr Fox said the loss of the option for employers to choose a fund is a very big disappointment, particularly to Australia’s small to medium size business owners.

“If employers want to select a fund that suits their workplace and they accept the responsibility to protect the interests of their employees, then they should be allowed to,” he said. “At the end of the day, if the government is setting the criteria for MySuper funds, then any fund meeting that criteria should be able to be selected as the default fund for a workplace.  By keeping superannuation as part of the industrial system and giving the power of selection to FWA, the value of competition is being lost to what is potentially a closed-shop solution.”

Mr Fox also said workers’ confidence in superannuation is falling and transparent policy settings are essential to help restore it.

“There is great fear from workers and retirees that the government will use superannuation as a short term budgetary solution at the expense of the long term funding it is intended for.  This Government-driven, anti-competitive influence over the choice of super funds undermines trust in our superannuation system.

“Competition is the cornerstone of efficient markets, where price and performance can be brought to bear – the MySuper arrangements and the default superannuation model are working together to effectively reduce competition, giving Australians inadequate choice in default funds.  This will ultimately lead to sub-optimal outcomes for Australian consumers.”

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Dante DeGori, General Manager Policy and Government Relations at the FPA said:

“The FPA supports the Productivity Commission inquiry into the appointment of superannuation default funds into awards.

“We believe that any process to appoint a fund should be dealt with professionally via a transparent set of criteria.

“This latest announcement by the government encourages an even playing field for all superfunds, industry and retail alike.  The FPA would support any move taken by the Government as a result of the findings to ensure greater competition and better outcomes for consumers.

“As a leading professional body in financial services, the FPA and our members continue to strive to provide qualified accessible financial advice that is in the best interest for all Australians.

“The FPA looks forward to the results of the review later on in the year and will assist where needed.”

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BT Financial Group head of superannuation Melanie Evans said for the superannuation system to deliver higher retirement savings, Australians needed a more open and competitive market. 

“We welcome the fact that the Government has delivered on its promise to ensure the Productivity Commission conducts this inquiry. 

“Australia’s superannuation pool will double from $1.4 trillion to $2.8 trillion within 10 years. It’s essential we get the system right. There is no margin for error on such an important issue.” 

The current system excludes certain funds from being available as the default superannuation fund inside modern awards, Ms Evans said. 

“We believe this needs to be changed. There is also a need to introduce greater transparency around the ongoing performance of funds listed inside modern awards. 

“Australians deserve a superannuation and retirement system that gives the best chance to maximise savings. We are hopeful the inquiry will help deliver greater competition and therefore higher retirement savings for working Australians.”

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“Reform of the system for disability care and support is essential from a social policy and long-term economic perspective, and it is important that the proposed National Disability Insurance Scheme is developed and implemented on a sustainable basis,” said Julie Evans, Convenor of the Disability Taskforce of the Institute of Actuaries of Australia. The taskforce will examine the Productivity Commission’s draft report.

“The Institute notes the draft report’s focus on the need to provide certainty for people with a significant disability and their carers. A sustainable scheme has features that recognise the financial risks involved where long-term commitments are made. Identification and effective management of these risks will provide certainty to those who will receive long-term care and support from the NDIS in the years to come,” Ms Evans said.

“Strong scheme governance and financial management, including comprehensive monitoring, are essential for sustainability. The draft report’s proposal to use a commercial insurance based approach provides a good platform for this,” she said.

Salient lessons can be learned from the experience of current state-based accident compensation schemes and other similar organisations operating internationally.

“Lessons from existing accident compensation schemes include the social value that can result from early intervention and participation in the workforce, and that an individual approach to case management is important to optimise long-term outcomes. The value of consistent and disciplined management has also been demonstrated,” Ms Evans said.

In its submission to the Productivity Commission’s enquiry, the Institute set out principles covering financial aspects which need to underpin provision of disability care and support services. These principles were developed based on the work of the many actuaries who provide advice on the financial sustainability of insurance schemes which provide support for those with disability through Workers Compensation, Motor Vehicle Accident Compensation, Medical Indemnity Insurance, Life Insurance or Superannuation.

“As part of the actuarial profession’s contribution to Australia’s public policy development, the Institute looks forward to providing further input to the Productivity Commission and public policymakers on the Productivity Commission’s draft report, as the Commission develops the formal recommendations for its final report,” Ms Evans said.

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