What will the federal government’s $10 billion reinsurance pool mean for you?
For over a decade Ann Greer has called her apartment at the Metro Quays home, but an insurance hike of $100,000 for the building in the past year is taking the joy out of her dream digs.
The Townsville woman said the city lifestyle her apartment offered first attracted her to the location but she is now worried about increasing insurance bills.
“We couldn’t get insurance, there was only one insurance company even offering insurance for strata at that point in north Queensland,” Ms Greer said.
“We’ve just spent the whole year trying to do this piecemeal thing of getting two or three months of insurance at a time conditional of us doing certain things,” she said.
Ms Greer is now paying $3,000 in body corporate levies to cover the costs — almost double from previous years.
“It all goes on size and I don’t have a very big unit,” she said.
Ms Greer’s story isn’t unique, with insurance prices increasing across north Queensland in the wake of the 2019 floods.
“The issue has been either you don’t have insurance and therefore you can’t sell because no-one is going to buy a unit when there is no insurance on the building, or the levies are so high that people won’t buy in,” she said.
“It’s really enormous the hardship on the people living in almost every building in Townsville.
“From what I understand very few buildings have not had really extraordinary increases in their insurance.”
Federal government responds
The federal government announced today that from July next year, a $10 billion reinsurance pool will be introduced in a bid to reduce home and business insurance premiums in northern Australia.
The pilot program will subsidise the cost of insurance coverage for cyclones and related flood damage.
The government expects the program will reduce premiums by more than $1.5 billion for households, strata, and small businesses north of the Tropic of Capricorn over 10 years.
In excess of 500,000 property insurance policies are expected to be eligible to receive cover.
“Homeowners and businesses have been faced with crippling insurance costs, and in some cases, can’t get insurance at all,” Prime Minister Scott Morrison said.
“It’s not OK, and we’re going to change that.”
Mr Morrison said the government investment would reduce premiums by acting as “a floor underneath the insurance industry”.
“That will encourage more insurance companies into the market,” he said.
Mr Morrison told Cairns radio station 4CA that he was aware “it’s been a cause of great concern in the north for a very long time”.
Queensland treasurer wants action
Queensland Treasurer Cameron Dick said the state government welcomed the plan for more affordable and accessible insurance premiums.
However, Mr Dick called for more detail from the prime minister, and for the program to be up and running before the scheduled date of July 2022.
“What we now need to see from the Morrison government is delivery,” he said.
“The announcement today says nothing is going to happen until 2022. That means another cyclone season that we’re going to have to live through without that pressure being brought to bear to make sure insurance premiums go down.”
PM unsure about savings
Meanwhile Mr Morrison declined to put a figure on how much the price of premiums might fall by.
“The government hasn’t said 50 per cent — that’s what others are speculating,” he said.
“We have a more cautious view on that, but let’s just see how that plays out.”
Federal Treasurer Josh Frydenberg said a taskforce led by the Treasury would work closely with the insurance industry and deliver the final design of the reinsurance pool.
“More affordable insurance means peace of mind for hundreds of thousands of Australians across northern Australia, knowing that their economic livelihoods are protected,” he said.
The federal government has also pledged $40 million for the North Queensland Strata Title Resilience Pilot Program, aimed specifically at reducing the cost of strata insurance, also known as body corporate insurance.
Federal Housing Minister Michael Sukkar said the three-year pilot program would subsidise the cost of cyclone risk mitigation.
Devil in the detail
Townsville Mayor Jenny Hill said it sounded like good news, but the devil would be in the detail.
“It’s a bit light on detail the announcement, we need to be sure that any policy on a reinsurance pool will actually benefit north Queensland,” she said.
Cr Hill said if executed correctly the scheme could lead to real savings for people in Townsville.
“There was a paper presented to the ACCC [Australian Competition and Consumer Competition] by an insurance group claiming that if reinsurance was to be established for this part of the world it could drive down costs of as much as 40 per cent purely on a home,” she said.
“One of the things we want to see is if people want to live in apartments and buy apartments they should be able to get insurance for those apartment at a very reasonable cost.”
Cr Hill said she hoped residents, businesses and local government would be consulted as the plan developed.
“Insurance, even for local government, is a problem. We need to understand how this reinsurance pool will work and can local government access it for civic theatres and community centres and playgrounds because at the moment things like playgrounds aren’t covered by insurance,” she said.