Insurance and Banking for Retirees in Australia
It is clearly the case that the Australian public has not been served well by previous governments and regulators when it comes to economic policy around competition. As the government, and potentially regulators given their recent rejection of the ANZ/Sun Corp merger have come to perhaps accept, there is inadequate competition across large and important areas of the Australian economy.
General Insurance
The result of over concentration, and too few competing firms in sectors such as banking and insurance, has meant that is too easy to pass costs onto consumers, rather than seeking to control those costs, particularly in a high inflationary environment. Therefore, although for example, general insurers have certainly faced rising costs in a range of areas, including home and contents and motor vehicle insurance, it is their ability to pass on costs to consumers, because of a lack of choice available, that is most damaging.
Four companies alone account for 74% of the general insurance market, and they operate under a variety of brands, which gives the (grossly incorrect) impression that there are more competitor firms in the market than is actually the case. Some of the brands operated by the two major general insurers, Suncorp and IAG, appear below.
| Insurer | Brands |
| Suncorp | AAMI, GIO, Bingle, Apia, Shannons, TerriScheer, CIL, Vero, Essentials by AAI |
| IAG | Buzz, CGU, NRMA, RACV, SGIO, SGIC, WFI, Swann Insurance and Lumley Insurance |
So, what can you do to protect your position and ensure that you are obtaining value for money, in terms of household and motor vehicle insurance.
| Access Choice material, which compares and rates the quality of coverage provided by individual insurers - obtaining cheap insurance is no good if the cover is inadequate or ineffective. Consider an annual subscription to Choice as money well spent. | |
| Get into a pattern off initiating a review of your insurance cover annually - at least a month in advance of your insurance coming to an end - and do not accept a simple rollover. Insurers habitually quote low rates for new customers, and then automate significant rises over the following years which have nothing to do with individual risk. In the case of motor vehicle insurance, you may also find that the value of your car insured is less than the market value. You need to obtain at least three quotes - preferably from insurers who rate well on Choice - and carefully consider what level of excess is appropriate in your individual situation. |
Banking
Little needs to be said about Australian banks - they exist in a very cozy competitive environment, protected by the notion that the nation needs strong banks, but often unwilling to accept that the social cost to the nation of an uncompetitive banking sector means that they need to accept a broader social ambit than a banking industry fighting for razor thin margins.
What does this gobbledygook mean - it means that Australian banks need to accept that they play a (restricted) societal role - and that includes providing, for example, banking services in rural areas which would perhaps be marginal or loss-making on a stand-alone basis, and banking services for customers on a non-selective basis.
This is important for retirees who suddenly find themselves unattractive to banks whose focus seems almost entirely upon lending. It's hard to believe, but retirees who suddenly have access to capital can struggle to open a new banking account or a credit card. Indeed, for retirees looking to put money away into term deposits, they will usually find that the major banks are not paying the most attractive rates.
To be practical, many older pensioners represent a "loss-making opportunity" to banks, but the fact that the major banks expend so little effort on even well-heeled retirees reflects a singular lending focus - as a result of net margins guaranteed by oligopolistic pricing. The only option available to retirees is to seek better terms and conditions amongst the minor banks - remembering that all authorised deposit taking institutions (ADI) qualify for the Australian government guarantee on deposits. The internet and the steadily shrinking services available at the local branches of the major banks make shifting your bank easier every year.
Finally, from a political perspective, make it clear to your political representatives that you will not support any further economic concentration, or the privatisation of what are often effectively monopolies.