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representatives vote 2020-12-09#2
Edited by
mackay staff
on
2021-01-22 13:11:51
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Title
Bills — Financial Sector Reform (Hayne Royal Commission Response) Bill 2020, Corporations (Fees) Amendment (Hayne Royal Commission Response) Bill 2020; Consideration in Detail- Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 - Consideration in Detail - Pre-condition for making regulations
Description
<p class="speaker">Matt Thistlethwaite</p><p>I move:</p><p class="italic">(1) Schedule 3, page 36 (after line 14), at the end of section 12DX, add:</p>- The majority voted in favour of *disagreeing* with an [amendment](https://www.openaustralia.org.au/debate/?id=2020-12-09.32.2) introduced by the MP Kingsford Smith [Matt Thistlethwaite](https://theyvoteforyou.org.au/people/representatives/kingsford_smith/matt_thistlethwaite), which means it failed.
- ### Amendment text
- > *(1) Schedule 3, page 36 (after line 14), at the end of section 12DX, add:*
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- > *Pre-condition for making regulations*
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- > *(3) Before making regulations for the purposes of subsection (1), the Governor-General must ensure the Minister is satisfied that the class of add-on insurance products has historically been good value.*
- ### Wording of section 12DX
- > *12DX Exemption by regulations*
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- > *Regulations may exempt a class of products*
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- > *(1) The regulations may exempt a class of add-on insurance products from sections 12DQ, 12DR and 12DS.*
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- > *Conditions on exemptions*
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- > *(2) An exemption under subsection (1) may be subject to conditions specified in the regulations.*
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- > *Note: A person who contravenes a condition may commit an offence (see section 12DZA).*
<p class="italic">Pre-condition for making regulations</p><p class="italic">(3) Before making regulations for the purposes of subsection (1), the Governor-General must ensure the Minister is satisfied that the class of add-on insurance products has historically been good value.</p><p>This bill grants the Treasurer the power to exempt from the deferred sales model certain types of add-on insurance to be made via regulation. The amendment that I present today makes it necessary for add-on insurance products to receive an exemption to be regarded as having a history of good value for consumers. This amendment comes about as a result of the extensive consultations about this bill that the member for Whitlam and I have conducted with consumer groups over the course of the last couple of weeks. They were under the apprehension that, when the government was putting the deferred sales model together, it would be a complete model and there wouldn't be opportunities for particular products to be exempted. Consumer groups such as CHOICE and the Consumer Action Law Centre have raised significant concerns about the carve-out for travel insurance flagged by the Treasurer in his second reading speech. The concern is that this could leave Australians open to unscrupulous sales tactics and to being sold unsuitable and expensive travel insurance. This would further compound the major problems we saw with travel insurance during the COVID-19 crisis. Consumer groups said:</p><p class="italic">Commissioner Hayne recommended 'industry-wide' reform as well as abolishing exemptions and loopholes.</p><p>After a massive spike in travel insurance complaints during the pandemic, we believe that any exemptions should be limited to those which are good-value-for-money products only. CHOICE has pointed out that in 2020 it found that buying travel insurance through add-on channels can cost consumers up to 350 per cent more than buying it directly. Travel agents receive commissions of up to 65 per cent on the premiums that people pay, and airlines use online pressure tactics to make sales. We know that Qantas provides customers with only 10 minutes to read a 15,000-word product disclosure statement before flight purchase times out.</p><p>It's clear that add-on products do not have a history of being good value for consumers. For example, using a family of four who travel to Bali for 10 days, CHOICE said that Qantas will sell add-on travel insurance for $230. You can get the same product and the same cover directly from Travel Insurance Direct for $136. So Qantas is making a mark-up on their product of 69 per cent. Even poorer value is the example of Jetstar—good old Jetstar: never miss an opportunity! For the same family and the same trip it would charge a whopping $517. But the same cover could be bought directly from Good To Go! for $144. That's a 259 per cent mark-up from Jetstar—not bad if you can get it! This is simply a bad deal for many Australian consumers and hardworking families looking to take a well-earned holiday.</p><p>So travel insurance sold as an add-on product should be worthy of an exemption if it can prove that it is good value for money for the consumer. That's in the amendment that I've moved:</p><p class="italic">(3) Before making regulations for the purposes of subsection (1), the Governor-General must ensure the Minister is satisfied that the class of add-on insurance products has historically been good value.</p><p>If that amendment is included in this legislation it puts pressure on organisations like Qantas, Jetstar and travel agents that are selling travel insurance—and other organisations that are going to be seeking these exemptions by the minister to the deferred sales model—to prove that their product is good value for money.</p><p>I would argue that a 259 per cent mark-up on a product sold through a major airline in Australia is not good value for money and that therefore the minister shouldn't be granting an exemption to products such as this. It's clear that the add-on travel insurance industry has been very poor value for Australian consumers, with no signs of improving. If the government lets them off the hook with this exemption then we're not going to see any improvement in the industry, and the whole purpose of the Royal Commission in this area will be lost.</p> <p class="speaker">Andrew Leigh</p><p>It is a real pleasure to rise on this important amendment by the member for Kingsford Smith, which goes to the issue of the exemption provided to add-on travel insurance. We know from behavioural economics that customers tend to make systematic mistakes when it comes to insurance. People tend to underestimate very large risks, such as the risk of death or catastrophic injury, and tend to overestimate the dangers of small risks, such as damaging your smart phone or getting your baggage lost when you're on holidays. Unfortunately, those who sell insurance are all too aware of these behavioural biases and so the value of mobile phone loss insurance tends to be very small. Conversely, if you're a seller of mobile phone insurance, you make out like a bandit. The profit margins on small-products insurance are extraordinarily high. These are products which are just not an actuarial good deal for customers. Behaviourally, that's because it's a kind salient loss; we have all lost a mobile phone, damaged a mobile phone or know someone who has, so we can easily envisage it happening to ourselves. But it doesn't follow that therefore it's a good deal to take out insurance for it.</p><p>The same goes for certain kinds of travel insurance where the profit margins can be very big, reflecting the fact that the payouts are much smaller than the premiums. Sure, some customers do end up making a claim which exceeds the premium they paid, but these are policies which often have a combination of exempt categories. For example, if you lose cash—often one of the first targets of thieves when people are travelling—it can be difficult to reclaim it. There can be limits on the value of items which are stolen and there can be significant deductibles, and so customers find themselves making a claim but then discovering that the insurer will only cover half of that claim.</p><p>We're very sceptical about the value of this insurance and about the government's willingness to provide it with an exemption to the usual rules. We're not the only ones who are sceptical about this. As the member for Kingsford Smith has highlighted, he and the member for Whitlam, the shadow Assistant Treasurer, have engaged in extensive consultations with consumer groups. Those consumer groups have raised the concern that we need to be very careful before providing a carte blanche exemption from appropriate regulations around the sale of this form of insurance.</p><p>Labor has a strong record of standing up for consumers. It was Labor, under Lionel Murphy, that put in place the competition and consumer framework that is fundamental to the Australian economy today. It was Labor, in the early 1990s, that spearheaded the competition and consumer reforms that led to the last big surge in productivity. If we want to get productivity going again in this country, we have to turbocharge competition. Only Labor can do that, because only Labor is the party of competition. Those opposite too often find themselves in thrall to vested interests—standing on the side of producers rather than consumers, being unwilling to recognise what the latest behavioural science has told us about the risks to consumers. They believe that scorched-earth, free market economics will do fine. They're acolytes of Ayn Rand, and their motto is caveat emptor, or let the buyer beware—leave them out in the consumer marketplace with nothing to defend themselves.</p><p class="italic">Mr Fletcher interjecting—</p><p>The minister at the table is saying it's a straw man. Minister, if it's a straw man, then stand on the side of consumers when it comes to travel insurance. Stand up for consumers on the issue of travel insurance. Your constituents, Minister, would be delighted if you stood in favour of them rather than padding the profits of travel insurers who are gouging consumers.</p> <p class="speaker">Rob Mitchell</p><p>When it comes to legislation, the devil is in the detail with this government. It's always the case that, whatever happens, they come out with the headline but never with the follow-up. The follow-up is usually what causes the most pain. This is no exception. As the member for Kingsford Smith rightly pointed out, this is about consumers who are being forced to pay more and to get less. To have a government that says, 'We'll get the minister to decide what happens'—once again, just as we've seen with every other royal commission that's been put forward, the government's decided, 'We'll have a royal commission just to shut people up, but then we'll go ahead and do our own thing.' That's exactly what's happening here.</p><p>We see that the minister wants to make the control to have exemptions—talk about putting a fox in charge of the henhouse. This is exactly what will happen: we will see this minister, as we see with other ministers when it comes to this sort of stuff, go and look after his mates and write exemptions carte blanche. The people who will be affected are the consumers—once again.</p><p>The one thing you can guarantee when it comes to this government is that they will never, ever stand up for Australians; they stand on them. The only thing they value is money. The only thing they seem to value is ensuring that people are, as they say, put in their place—'know their place', I think, was the term. 'Stick to your knitting' was the catchphrase for this government.</p><p>As the member for Kingsford Smith pointed out, we're seeing people who—at a time when we've gone through a tough pandemic and are in the middle of this Morrison recession—might be looking forward to going away for a holiday. Then they're forced to pay exorbitant amounts for something that may not be deliverable. We talk about travel insurance, and we look at things like Qantas. We've already seen the ability of Qantas to be an absolutely wonderful corporate citizen, taking money hand over fist from the government, sacking workers willy-nilly and leaving thousands of people out of a job. When it comes to travel insurance for a family of four, we're talking over $100 difference—$100 difference for one simple thing—because you can buy the travel insurance direct for around $136, whereas Qantas will charge you $230.</p><p>The other thing that they do, in a quick way to fool people, to leave people in the lurch, is to not allow you even a quarter of an hour to sit down and read 1,500 words. I know some of us in here think we're great speed readers, but, come on, let's be serious. That's the important thing here: we're seeing consumers being ripped off, being forced to pay above and beyond the quota, and not being given the opportunity or the chance to thoroughly understand what this means. Now we've got a minister who sits there and says, 'Look, I'm the great font of knowledge and fairness. I'll be the one who makes the decisions on exemptions.' This is not right and it's not fair. We know that the government will continue to do what they're doing at the moment—and that's always to make a headline that says they're going to be great and they're going to be helpful. But, when it comes to the detail, we find it is the average Australians—the families out there, the mums and dads in our communities—who are the ones being impacted.</p><p>Whether it's travel insurance or insurance relating to motor vehicles—I'm very passionate about my motor vehicles—there hasn't been a person, I think, who's ever come to me and said that they've been forced to buy repair cover, or wheel and tyre cover, and that it's always worked out well.' It never does. No-one gets the opportunity, when they're forced to do something straightaway, to sit down and read it—when they're purchasing something that sometimes is the second-biggest purchase they make in their life, outside of their family home.</p><p>What we need to do—and I think the royal commission brought this into place—is ensure that people are given proper opportunity to scrutinise things, to sit down and think them through and make sure that they're getting value for money. But the government wants to say: 'No, no. Let's just scrap that. We know best. We're the ones in charge. We're the ones who wrote the headline. We're the ones who put out the press release. You don't need to worry. All is good.'</p><p>When it comes to all being good, I go back to what I said about what's happening with the likes of Qantas, where we've seen thousands of workers being ripped off, losing their jobs, fighting to get back jobs that they already had, while the government keeps putting money into it—and I'm not even going to step onto Rex airlines, because we know that's pure pork-barrelling by the National Party.</p><p>The important thing here is: we've got to make sure that protections are in place to look after consumers—the mums and dads out there in the street who are working hard and trying to survive. It's tough enough as it is during this Morrison recession. But these add-on travel insurance products have been shown to be nothing more than poor value, and we need to address this by supporting the amendment by the member for Kingsford Smith.</p> <p class='motion-notice motion-notice-truncated'>Long debate text truncated.</p>
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