Peter Dutton is threatening to break up big insurance companies because he claims they’re ripping off consumers. While big business isn’t happy about his stance, arguably it will add to his voter support.

The Opposition leader has been willing to break ranks with big companies wielding a lot of market power and generating high prices for the nation’s shoppers because they have little real competition. A case in point was his tough views on Coles and Woolworths, where he showed support for the Albanese Government’s threats to make the supermarkets divest or get rid of some of their businesses to increase competition and generate lower prices.

This non-conservative leaning of Dutton, which has brought forth an emotional and angry response from Bran Black, head of the Business Council of Australia, is being populist and even Trump-like, but it’s bound to be popular with voters.

In a more measured reaction, Black made a more telling point to the AFR. “The last three independent competition reviews – being the Harper, Dawson and Hilmer reviews – all rejected divestiture powers, noting they had the potential to counter productively increased prices and reduce job security,” he said.

While that might be true, it doesn’t alter the claim by Dutton and others that insurance companies are overcharging.

The AFR’s Tom McIlroy points out that “insurance premiums have surged in the past year, with Australian Bureau of Statistics data showing a 16.4 per cent rise, the highest rate in three decades”.

The surge in inflation after the Covid lockdowns coincided with fantastic profits for many big businesses that don’t have real competition and it does raise the question whether we need more government monitoring of pricing and profits of banks, supermarkets, insurers, power suppliers, airlines and other big businesses that face very little real competition.

But the pricing monitor might also have to see how governments affect prices to consumers.

The AFR cited Andrew Hall, a former National Party director and director of the Insurance Council of Australia. He argues that the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) heavily look at insurers.

Interestingly, Hall revealed that “State and territory governments collect more tax on insurance products than insurance companies make in profit. The abolition of state insurance taxes would reduce premiums by 10 to 30 per cent, providing immediate cost of living relief.”

The chart below tells two interesting stories about the Insurance Australia Group (IAG). First, the rise this year has been a big 26.58%. Second, the rise over five years was only 15%, which indicates little profiteering but there was Covid challenges in that number. Third, between June 2022, when Covid lockdowns ended, and inflation was high, IAG’s share price spiked 127% from $4.14 to $9.20 and super normal premiums and profits were at the heart of that rise.

IAG

Last week, IAG reported better than expected but its share price slumped 11.5% for the week. Why? It looks like the company’s dividend of 12 cents a share was less than the expected 14.5 cents predicted by the likes of Goldman Sachs.

Meanwhile, the ABC reported that Nick Hawkins, CEO of the insurer, did OK with a 78% rise in his pay to $5 million.

Peter Dutton’s crusade against insurers will be a vote winner. If he becomes PM, one of his first jobs will be to tell the ACCC to play harder ball with the insurance industry and maybe state governments as well, which might be easy for him, as most are Labor governments, except for his beloved Queensland.