Strata insurance premiums in North Queenland had been rising for some time and reports of massive increases as policies were renewed that year had started the emerge. Initial reports of such increases actually pre-dated Cyclone Yasi. So strata insurance in North Queensland was included in the review while not being the primary focus.
The NDIR report was released on September 30, 2011. The focus of the report was mostly related to flood insurance and the pivotal recommendation of a flood risk reinsurance facility, supported by a funding guarantee from the Commonwealth.
Because cyclones are treated by insurers as storms, all insured homes and home units have full cyclone coverage. As a result, for example, policyholders with claims for loss or damage from Cyclone Yasi have, on the whole, been dealt with effectively by their insurers. As renewals occur of policies taken out before Cyclone Yasi, however, some very large premium increases, sometimes 300 per cent or more, are being sought by insurers, especially for home units.
Such extreme price increases can occur for several reasons but, irrespective of the reasons, they are presenting immediate affordability problems and can also cause continuing problems.
The Review Panel has not had the means or the time to investigate fully the causes of these price increases but it does accept that there is, prima facie, an affordability problem.The Panel is therefore making a two-stage recommendation:
Recommendation: Cyclones • The Agency offer cover to insurers for cyclone risk, on the same basis as for flood risk, but with no affordability discounts (in the expectation that, when the Agency does its own pricing, it will offer a fair price to home and home unit owners; this price may be lower but is not guaranteed to be lower than the prices of commercial insurers); and • an investigation be undertaken to ascertain whether there is a basis for granting affordability discounts for cyclone risk, along the lines of the recommended flood insurance discounts, for homes and home units in northern Australia.So a panel with extensive experience in the insurance industry recognised a significant problem and recommended including further investigation. Billy's response to that report was a bit skinny to say the least! The full official Guvmint response for the specific recommendation was:
The Government is aware of home building and strata title insurance premium increases in Northern Queensland following cyclone Yasi.Note: They also actually get this wrong on the premium increases being only post Yasi! The broader response also included the proposed reinsurance facility which could include cyclone cover:
The Government will consult with the insurance industry on the causes of premium increases and options available.
The Government will consider this recommendation as part of its broader consideration of the appropriateness of establishing a flood reinsurance pool following a consultation process in 2012.
The Government notes the recommendation and that it represents one possible approach to the delivery of flood insurance premium discounts and to facilitating the provision of flood cover by insurers.You can find the list here : Treasury reviews. However, I can't find anything related to this for 2012 for the promised review? It seems to have disappeared? Enter stage right Warren Entsch, quite correctly as it is a political issue. In late 2011 at a public meeting in Cairns, the Wazz, fresh from a stint as chairman of a subsequently bankrupt public company, lambasted the insurers as predatory pricing gougers and won the crowd. Jan McLucas agreed to a parliamentary inquiry in the last week of parliamentary sitting and subsequently in the last sitting week before Christmas, Billy Shorten agreed.
This recommendation will be considered as part of the broader consideration of the introduction of flood insurance premium discounts following a consultation process in 2012.
So, it came to pass that the issue was referred by Billy Shorten to the house parliamentary committee for Social Policy and Legal Affairs, and an inquiry happened. Now, the inquiry was illuminating and had some merits. The outcome however is somewhat different.
Despite the reports of the Cairns Post that there was some kind of positive outcome the reality is that Committee recommendations were almost entirely rejected (will subsequently comment on some aspects here). The principal outcome was to refer another inquiry to the Australian Government Actuary.
Remember him (yes it is a he)? He is in paragraph one at top of this post! He was involved in the initial inquiry that recommended an inquiry to try and understand what is happening! That is now nine months ago!
Meanwhile, anything proposed by Warren Entsch is increasingly non-sensible dribble (another post) while he concerns himself with parliamentary numbers, and Billy Shorten, quite frankly, is an incompetent show pony who should never be allowed anywhere close to to his own aspirations!