Business and community leaders have welcomed proposed legislation aimed at slashing the cost of home insurance for thousands of households in cyclone-prone parts of Australia, but say they are still in the dark about the details.
Key points:
- The reinsurance pool is designed to reduce the cost of home insurance premiums by 46 per cent
- Insurers say they’re still waiting on crucial details before they can calculate the pool’s true savings
- Assistant Treasurer Michael Sukkar says the plan will deliver $ 2.9b in savings for homeowners over the next 10 years
The government’s long-awaited reinsurance pool is scheduled to come into effect from July 1.
It promises to correct a market failure that has seen the price of some premiums in northern Australia soar by up to 20 times the cost of insuring a property in Sydney or Melbourne.
The bill, expected to pass parliament this fortnight, is backed by the Northern Australian Insurance Lobby (NAIL), whose chair Margaret Shaw has led a decade-long campaign for fit-for-purpose insurance for northern Australians.
“I have seen people go bankrupt, I have seen people have bankruptcy because they can not cope with their insurance premiums,” Ms Shaw said.
NAIL still has concerns about the bill excluding commercial buildings that are insured for more than $ 5 million.
“But I have a commitment from the federal government that in the 12-month review they will review strata accommodation models, they will review small marine business property and they will review residential home care,” Ms Shaw said.
‘Crying out for this’
Assistant Treasurer Michael Sukkar said the reinsurance pool would deliver $ 2.9 billion worth of savings for homeowners over the next decade.
“Our expectation is we’ll see premium reductions for homeowners of 46 percent,” he said in Townsville on Monday.
Premiums covering strata properties are forecast to decrease by 58 per cent, while small and medium businesses could see discounts of 34 per cent.
Townsville Chamber of Commerce chief executive Ross McLennan said the legislation made some “very bold predictions”.
“Northern Australia has been crying out for this for a long time, so I think it’s a step in the right direction,” Mr McLennan said.
“We’ve got no data that is going to be able to verify that, they’ve obviously got some modeling they’re working on but that has not been disclosed to us.
“There is some stuff based around reporting and verifying these assumptions, but they will not be due until 2024.”
‘A massive issue’
Mr McLennan said with 25 per cent of people in the region uninsured urgent action was needed.
Research carried out by the chamber has shown a 50 per cent reduction in residential insurance could have significant implications across the city’s entire economy.
“We’re talking about a gross multiplier of $ 120m per year in GDP,” Mr McLennan said.
“Insurance makes up about six per cent of household discretional spend – it really is a massive issue.”
With a federal election looming Mr McLennan said the chamber was doing its best to keep the issue on the agenda.
“Optimistically we hope what they are saying is right, we hope this will become a reality, but time will tell,” he said.
“We’re already talking to all sides of politics about this and getting their views because of the importance that this has to be passed in the next two weeks of parliament sitting.”
Insurers still in the dark
Mr Sukkar conceded that Monday’s announcement was missing crucial details about the cost to insurance companies, which would be legally required to join the pool.
“Those details are going to be commercial matters between the Australian Reinsurance Pool Corporation (ARPC) and the individual insurers,” he said.
Insurance Council of Australia (ICA) chief executive Andrew Hall says detail is crucial for companies.
“The next step of commercial negotiations with the ARPC will need to be completed to fully understand the impact on premiums,” he said.
If parliament passes the bill, the Australian Competition and Consumer Commission (ACCC) will have a budget of $ 15.4m over four years to monitor whether savings from the reinsurance pool are being passed onto consumers.
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