The Australian Competition and Consumer Commission’s (ACCC) has found that government reinsurance pools and government-run insurers are not well-suited to lowering insurance premiums in northern Australia – findings supported by the peak insurance body.
Premiums on a like-for-like basis in the north and in other high-risk areas are on average 1.6 times the cost of premiums in lower-risk regions, said Karl Sullivan, Insurance Council of Australia (ICA) head of risk and operations.
In its second interim report, the ACCC’s Northern Australia Insurance Inquiry said government reinsurance pools and government insurers are not well-suited to addressing affordability concerns in a targeted way, as these “have generally been introduced overseas in situations where insurance was not available through the private market, which is not the case in northern Australia.”
ICA also backed the ACCC’s findings that pre-disaster mitigation, such as flood protection infrastructure and improvements to properties, “can increase the resilience of properties and reduce the risk of damage from a natural disaster event,” which in turn can “lower premiums in both the short and long-term.”
“The ICA is analysing surveyed data and other figures in the ACCC report and comparing them with industry policy data to extract further insights that may assist governments to design and fund solutions that will have a material impact on community safety and insurance premiums in these highly exposed regions,” Sullivan said.
The consumer watchdog’s focus in 2020 on the role of improved building standards and reforms to land-use planning has also been welcomed by ICA, saying it “could have on longer-term affordability and availability of insurance.”
“The ICA agrees with the findings of the ACCC report that these initiatives offer sustainable ways of addressing the extreme risks faced by residents of the north,” Sullivan said.
