Assistant Treasurer Stephen Jones is leading a more proactive and collaborative approach to tackling insurance challenges

By John Deex

Last year, Assistant Treasurer and Financial Services Minister Stephen Jones joined an insurance industry delegation to Europe to consider global reinsurers’ approach to the local market and the impact on spiralling home premiums.

And last month, speaking at the Insurance Council of Australia annual dinner, Mr Jones said the trip was “one of the most valuable things I have done in the past two years”.

He believes it created a “team Australia” mentality between government and insurers, and gave him a detailed understanding of how the local market works, and the impact of global forces.

Since its election victory in 2022, the Albanese government has fostered a more consultative relationship with industry, and Mr Jones has played a key role.

The son of a teacher and school assistant, he grew up in Wollongong, NSW, as part of a large Catholic family, and holds bachelor of arts and bachelor of laws degrees.

His early career was spent as a community worker for disability youth services, before he became a lawyer with the Australian Council of Trade Unions, and then secretary of the Community and Public Sector Union.

Mr Jones was first elected to federal parliament in 2010, and now represents Whitlam, NSW. He was appointed Assistant Treasurer and Financial Services Minister in June 2022.

A less confrontational approach was immediately apparent as insurers responded to the record-breaking floods of that year, and industry welcomed confirmation of $200 million a year (matched by states and territories) to be spent on mitigation.

ICA chief operating officer Kylie Macfarlane, ICA president Nick Hawkins and Assistant Treasurer Stephen Jones at the recent ICA annual dinner. Top: Mr Jones addresses the audience. Credit: Salty Dingo/Photographed by permission at the Art Gallery of New South Wales. Artwork courtesy of John Pule and Gow Langsford Gallery

“I think we have a very good relationship [with the insurance industry], I think it’s a mature one,” Mr Jones tells Insurance News.

“I’ll make criticisms where I think they are warranted and needed, but what I’m most interested in is outcomes for Australians, households and businesses.

“I’m not interested in engaging in populist politics on this stuff. I’m really interested in dealing with evidence-based policy and interventions that the government can make to get a real result, not a headline.”

There are plenty of government interventions in play. A Senate inquiry has been announced to examine the impact of climate risk on premiums, the flood inquiry into insurers’ responses to the events of 2022 is ongoing, and the Hazards Insurance Partnership has been meeting since February last year.

In addition, the government has just launched its Insurance Affordability and Natural Hazards Risk Reduction Taskforce, which aims to ensure a “cross-government approach” in tackling the affordability challenge.

“The stuff we’ve been doing with the Hazards Insurance Partnership is the measures that fall within the federal jurisdiction, but so many of the issues we are dealing with require state, territory and federal government co-operation,” Mr Jones tells Insurance News.

ICA has long advocated for mitigation and risk reduction, as high premiums reflect high risk, but it now says a short-term “partnership arrangement” with government is also needed to assist the most flood-exposed households.

ICA chief executive Andrew Hall addresses the group’s annual dinner. Credit: Salty Dingo/Photographed by permission at the Art Gallery of New South Wales. Artwork courtesy of John Pule and Gow Langsford Gallery

Chief executive Andrew Hall confirms members are discussing flood pools and subsidies, among other options.

The government’s taskforce will consider “other near-term solutions to improve affordability”, but Mr Jones won’t comment on whether a flood pool or subsidies fall under that description.

“There are no government decisions on any of that sort of stuff,” he tells Insurance News.

“I’m not going to be drawn on it. We’ve just delivered the budget, we’re not going to be rewriting it within three weeks.

“From the government’s point of view, if there are near-term measures that have been identified that get us some easy and quick wins, then we’d be crazy not to look at them and implement them as soon as possible. We’ve set up a taskforce. I’m not going to prejudge an outcome before the taskforce has got busy on its job. Let the taskforce do its work and then we’ll consider the recommendations.”

Mr Jones says reducing risk is the “only enduring solution” and that’s where most of the effort has to go. He also says the nation must “stop doing dumb things” like building on floodplains.

He welcomes the Senate and lower house flood inquiries and says the government “will listen closely”.

Flood inquiry hearings have been “incredibly moving”, with themes emerging around poor case management, communication, wear and tear disputes, and hydrology reports.

“I’ve got a lot of faith in the work that [Labor MP] Daniel Mulino and the people on that committee are doing. They have put a lot of time into it and worked very hard, so I’m very much looking forward to seeing what they come forward with.”

Mr Jones says he is “impatient” to see homeowners rewarded with lower premiums for carrying out mitigation work.

Customers of some insurers have been offered premium discounts if they use a federally funded bushfire resilience app to reduce their property’s risk exposure – and Mr Jones wants to see more such initiatives.

“We have got to get things moving. It’s the price signal in reverse and it shows households that there is some value in doing things differently and putting in place those mitigation efforts. There are concentrated areas in Australia where this would make a big difference.”

“I’ll make criticisms where I think they are warranted and needed … I’m not interested in engaging in populist politics on this stuff.”
Stephen Jones

Mr Jones says the cyclone reinsurance pool is working, but he “won’t oversell” the household-level benefits.

“The measure of success in this is what it is doing for premiums in the highest-risk areas, and premiums in the highest-risk areas are coming down.

“They are not coming down by any of the reckless promises that my predecessors made, but they are coming down … It’s a meaningful reduction, but we’ve just got to have a sense of perspective of what measures like this can do.”

Which brings us back to mitigation.

At last month’s dinner, during a “fireside chat” with Mr Jones, ICA president Nick Hawkins said the work needed on mitigation could seem like a never-ending challenge, but he equated it to “kids saving to buy a house”.

“If it seems too far away, sometimes you just never start. This topic is similar. We can overthink it, or we can just start doing it. Let’s start investing, let’s double down on that.”

While there are government projects ongoing, ICA believes there is still more to be done on the mitigation front. In its pre-budget submission, it asked for the $200 million a year in the Disaster Ready Fund to be indexed so it doesn’t fall in real terms, and be extended to a 10-year rolling program. It also called for an additional $250 million a year in federal cash to fund buybacks and home-raising.

Neither materialised in the budget.

“The thinking is that we have got a couple of lines of inquiry in the field at the moment,” Mr Jones tells Insurance News. “Let’s look at what they are coming back to government on before we do any major push into this area.”

Mr Hall says it’s the long-term relationship that’s important.

“We’d love them to accept all of our ideas, every budget, but we know that it’s a long build.

“And I think if we weren’t also involved with the Hazards Insurance Partnership, and also involved with really good and ongoing discussions with the Assistant Treasurer’s office, we’d feel disappointed.

“Our job is to keep raising publicly these ideas, and the concept that governments do need to be doing mitigation, through ideas like buybacks, and investment.

“Once the clarity starts to emerge, then those ideas we keep advocating for will start seeing the light of day.”

Pull the lever: the taxing issue that won’t go away

When affordability is causing so much pain, state taxes on insurance can be particularly galling.

New South Wales has committed to abolishing the emergency services levy on insurance, which is a huge step forwards, but most states, including NSW, still impose stamp duties.

“The states collect about $6.8 billion in stamp duties from insurance premiums and other levies,” ICA chief Mr Hall says. “On top of that, about the same amount again is collected in GST, which is all returned to the states.” Mr Hall says it is “probably naive” to think state governments will readily give up such a revenue source. But he believes the federal government can play a role.

“I think the Commonwealth government is turning its mind to the fact that insurance premiums have been rising due to risk and due to other factors, and that is leveraging up the income revenue for states. The Commonwealth government then are the ones that often are left with the bill after natural disaster events.

“So I think there’s going to be an increased focus on the Commonwealth/state relations and this tax.”

Mr Hall says “maximum focus” should be on the fact that insurance consumers are taxed “very heavily”.

“Some of that money should be apportioned back to the job of making it a more resilient country. We do keep pointing out, when the discussion comes around on affordability, there is a lever there … the same lever that exists for petrol prices.

“They could reduce stamp duty for a period of time. We’ll keep the pressure up.”