Four major insurers dominate the Australian general insurance market, which gives the appearance of choice with the offer of many brands, says the Productivity Commission in a report on competition in the financial system.
The four majors underwrite more than 30 brands while two of the smaller insurers underwrite 50 brands between them. One company underwrites 23 of 25 pet insurance brands.
In some areas of financial services, proliferation of products with slight variations in features has become a burden for providers as well as consumers, says the report.
The new Australian Financial Complaints Authority (AFCA) will take over the work of three external dispute resolution schemes and be able to consider claims of higher value when it comes into being in November, 2018.
AFCA will replace the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal.
They hear disputes involving banking, credit, insurance, investment and superannuation. Members of these industries pay fees that fund the schemes.
Industry members of FOS and the CIO will have to retain those memberships for 12 minutes after AFCA opens its doors, so existing matters can be processed.
When did you last write a cheque? Probably not for a long time, and if you are in your twenties you possibly have never owned a chequebook. Cheques now account for only 1.2% of all non-cash transactions in Australia.
Cash use is also falling as more Australians switch to electronic payments, although the folding stuff is still the most popular way to pay.
Withdrawals from ATMs dropped 6.6% in the 2016 financial year, with about $700 million withdrawn, compared with $750 million in 2014.
Baby boomers are moving into retirement and starting to use some substantial superannuation balances, but most of the conversation around super is about building savings.
The financial industry is on notice from the Productivity Commission that it will investigate transition to retirement and pension products in its inquiry into the competitiveness and efficiency of the super system.
“The Commission intends to assess whether the system is meeting the needs of members during these phases, including via product innovation that addresses tax effectiveness, transition and longevity risks,” says the Commission in its draft report released this month.
Image courtesy of JanPietruszka at FreeDigitalPhotos.net
The insurer HIH went broke in 2001 but the fall-out from the group collapse continues with a recent court decision in favour of investors.
The NSW Supreme Court has awarded damages to investors who bought shares in HIH when the share price was inflated by misleading information released by the company.
The shareholders were able to prove “indirect causation” or that they had suffered loss even though they did not rely on an overstated profit figure when buying their shares.
An analysis by Damian Clancy and Paul Bannon of legal firm Colin Biggers & Paisley says the decision sets a precedent and is significant for shareholder class actions.
“So long as a shareholder can prove that a corporation’s misleading or deceptive conduct (or material omission) artificially inflated the price of that corporation’s securities, the shareholder may be entitled to recover the loss and damage suffered by reason of that fact, even if the shareholder did not rely upon the relevant conduct,” they say.
Remember the Commonwealth Government bank guarantee?
Implemented in November 2008 at the height of panic during the global financial crisis, the guarantee gave the Australian financial system a much-needed injection of confidence by enabling banks to raise funds.
The scheme ended late last year. No claims had been made and the Government had earned $4.5 billion in fees.
The fears of 2008, when major companies and banks around the world were failing, are recalled in a study by Carl Schwartz and Nicholas Tan of the Reserve Bank of Australia.
The Federal Government faces calls to regulate property investment advisors in the same way as financial advisors following an exposé of land banking scams.
Many Australians have invested in land developments that will prove to be worthless, having been enticed by high-pressure sales tactics and misled into thinking they are buying land that will soon jump in value.
The Senate Economic References Committee has called for tighter controls on property investment advisors, saying they should be regulated by the Corporations Act.
You can make your fortune or blow your dough by investing in innovation, but nations need it remain competitive, which is why the Federal Government is proposing tax breaks for investors.
The Government is consulting on its proposals and how to define an “innovation company”.
It will be vital to set eligibility criteria that ensures money goes into early stage innovation projects, under a strategy announced in December as part of the Federal Government’s National Innovation and Science Agenda.
The credit card market is fiercely competitive, but lenders are battling it out on reward and loyalty features rather than interest rates.
A senate inquiry has found that competition is generally more intense on less important card features, such as rewards and transfer programs.
The Senate Economic References Committee’s report released prior to Christmas says consumer inertia means many people have the wrong product for their needs and often don’t know the interest rate they are paying.
Generous tax benefits for superannuation and limited controls on contributions both magnify how the system works against women, researchers at Curtin University have told the Senate inquiry into economic security for women in retirement.
High-income earners and people with flexible assets that can be moved into super benefit from the structure of superannuation, say researchers from Curtin’s Women in Social and Economic Research (WISER) unit.
“Because women are underrepresented in these groups, they receive a relative small share of the benefits of the increasingly large tax expenditures on superannuation.”