Insurance cripples northern Australians as they wait on promised Government action to stem rises
Unit owners in northern Australia are begging for promised Federal Government intervention to drive down soaring insurance premiums, with some unable to afford their bills.
“It’s extortionist behaviour,” Erna-Jean Pozzetti said.
“We’re on a cliff now, just hanging onto a branch, and if governments don’t intervene that will snap.”
Mrs Pozzetti and her husband own a large stake in Ocean Resort Village, a 35-unit holiday resort in Mackay in North Queensland, a region vulnerable to cyclones and floods.
She is stressed by their annual insurance quote of $174,000 — more than triple last year’s amount.
“I don’t see retirement,” the woman in her 70s said.
The couple’s insurer has pulled out of the northern Australia strata market and they have struggled to find a provider who will insure the complex, despite only ever making one minor claim.
Mrs Pozzetti is “worried sick” the building will be uninsured this wet season with a heightened risk of flooding and cyclones forecast for northern Queensland.
Unaffordable, unavailable insurance
The Australian Competition and Consumer Commission (ACCC) is wrapping up its investigation into the availability and affordability of home, contents, and strata insurance in northern Australia.
Since July 2017, the ACCC found:
- the risk of natural disasters, larger reinsurance costs, and subdued competition in northern Australia contributed to higher and increasing premiums compared with other parts of the country;
- strata insurance is mandatory, and the ratio of premiums to sum insured can be up to four times higher than the rest of Australia; and
- insurers managed their risk exposure by increasing premiums, refusing to cover some properties, and exiting the market — particularly for strata where claims were on average three times larger than those made in the rest of Australia.
Government yet to detail action
In November 2019, Assistant Treasurer Michael Sukkar said he would “make some decisions” ahead of the release of the ACCC’s final report, due to the Treasury at the end of next month.
“People are sick of reviews and committees and reports,” Mr Sukkar said a year ago.
“I can assure you that [our final response] will be ahead of the ACCC final report, which is late next year , because I think it’s so urgent and that time is of the essence.”
The Government has progressed some of the ACCC’s interim recommendations and was exploring other potential solutions, but it is yet to detail them.
Margaret Shaw, a strata consumer advocate based in Townsville, said governments have spent years missing opportunities to take radical action.
“It is getting very dire,” Ms Shaw said.
“If nothing is done, there will be more and more strata which will not be covered by insurance.”
Progress on possible solutions
In his 2020 Budget speech, Treasurer Josh Frydenberg said resilience investments would be announced in response to the Royal Commission into Natural Disaster Arrangements.
“The chronic underspending by all levels of governments on mitigation and resilience programs is leaving many communities exposed,” Insurance Council of Australia (ICA) spokesman Campbell Fuller said.
Treasury has also been investigating the feasibility of establishing a Commonwealth-funded cyclone reinsurance pool to provide insurers cover for losses beyond set limits in a bid to lower premiums.
The Nationals’ Federal Member for Dawson, George Christensen, said the Government would consider including bushfire-prone areas.
“This is bigger than North Queensland, there are similar issues that are now impacting upon bushfire-prone areas,” Mr Christensen said.
“It may be a natural disaster risk reinsurance pool, but ultimately the decision on that is up to the Treasurer and Assistant Treasurer.”
The ACCC said such a scheme would not address affordability concerns in a targeted way.
Other ideas include direct subsidies, improved building standards, and rules that insurers provide a minimum number of policies in northern Australia.
No intentions to abolish stamp duty
The ACCC has been calling for state and territory governments to abolish or rebase stamp duty on insurance products.
The Queensland election is on Saturday, and neither major party is committing to reviewing stamp duty, though the Katter’s Australian Party is pushing for it.
The other northerly states and territories of Western Australia and the Northern Territory have not indicated support to remove the tax either.