Mr Elliott told the Productivity Commission (PC) on Tuesday, 6 March, that lenders mortgage insurance (LMI) is part of a broader package offered by lenders, claiming that it would be unreasonable to “slice and dice” a loan in the name of competition.
In draft finding 11.1 of its draft report into competition in the financial services sector, the PC claimed that the LMI market is “highly concentrated”.
Commissioners questioned ANZ over the lack of “competitive tendering” in the LMI space.
Mr Elliott noted that pricing of LMI isn’t “simple”. He drew an analogy between the issuing of LMI as part of a loan product and the purchasing of a car.
“It’s a little bit like buying a car. I don’t go through and say, ‘I’d like to understand who all the possible providers of the air bags are [and] I’d like to know who are the possible providers of the steering wheel, and the seats and all those bits and prices’ — it’s a package,” Mr Elliott said.
“[LMI] is part of [the] package, and if you don’t want the LMI, you can’t have the loan. It goes together.
“The idea that we should slice and dice all the features and functions and compete on them individually - I don't think it’s reasonable for us to provide that.”
Meanwhile, ANZ’s CEO also insisted that the “fluid and competitive” market has provided customers with greater access to low interest rates.
“The market is fluid and competitive,” the CEO said.
“In this market, consumers have won with increased discounts delivering lower rates. Consumers are refinancing both within and between banks to capture lower rates driven by competition.”
The major bank chief acknowledged that while there are “some barriers to entry” in the lending space, new players have been deterred from engaging in the competitive market.
“It’s not that difficult to get a license, set up a bank in Australia and compete, but many have chosen not to, not because of the regulatory barriers, but because it’s hard, because it’s competitive, because returns are low, because there are scaling requirements in terms of being an effective competitor in the market,” Mr Elliott said.
“That may change with fintech and open data, but we’ll have to wait and see.”