Friday, October 19, 2012

Stop Press: Strata Whitewash!

The report by the Australian Governement Actuary on strata insurance in North Queensland was released today: REPORT ON INVESTIGATION INTO STRATA TITLE INSURANCE PRICE RISES IN NORTH QUEENSLAND

This report has found no basis for any  intervention and a negative reaction should be expected in North Queensland. There are profound consequences for the viability of strata units and development. Cost structures of units relative to houses do not appear to stack up. A quick email response already from a prominent Cairns property and economic identity:  "Yeah what a whitewash. Pay up and shut up....."

Fridays afternoon drinks time so this Stop Press will be expanded when further analysis allows but a quick look has thrown up potential queries such as: The short time scale of the analysis which only includes the five years since 2007? Why there are no comparisons with housing insurance in the same regions? Why no data from TIO was included, as an unstated outcome of this report would appear to be that risk in Darwin is being seriously underpriced?

Based on the parliamentary inquiry I have previously commented that I didn't have much confidence in the quality of information from the insurers or the outcome of this report. A particular comment in the media release from Minister Bill Shorten drew my attention:
"The Insurance Council of Australia has raised the option of whether strata complexes could potentially reduce their insurance premiums via discussing a higher excess with their insurer, and options like this are worth examining in more detail," Minister Shorten said.
Hello Billy! Earth to Billy! What the do you think has been happening mate? Those premium increases have also included big new increases in excesses from insurers already. At my own building the increase in the past two years has included big excesses for water and cyclone damage which are now standard from the insurer. This does not appear to  have been factored into the AGA analysis as current premiums analysed can be for significantly lesser coverage.

At the most recent renewal the ONLY other insurer to quote was a higher premium but without the big excesses. I specifically queried whether they would consider higher excesses for a reduced premium and was told NO! 

So, no thanks for the gratuitous advice from Billy-for-Shorten and the Insurance Council. From the performance of the Insurance Council representative at the parliamentary inquiry it doesn't surprise me that they don't know what is going on either!

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