The general insurance sector has conceded that it has begun avoiding covering risky properties, but denied the “misperception” that it engages in premium price gouging in northern Australia.
According to an issues paper released by the Australian Competition and Consumer Commission (ACCC), catastrophe-prone areas, such as Townsville, Cairns, Darwin, Alice Springs, Karratha, Broome, Rockhampton, and Mackay, saw an average 80% premium spike, mainly between 2008-09 and 2012-13. The competition watchdog was tasked to look into insurance affordability in the region, fuelled by a $7.9m funding boost from the government.
In a submission, the
Insurance Council of Australia (ICA) said the industry “accepts raw premiums have grown over the past decade. However, measured nationally and when changes to insured asset values are considered, premiums have grown at rates lower than average earnings,”
The Australian Financial Review reported.
Following an
ASIC action which led industry giants to refund $120m to customers for “dud” car-yard insurance products, ICA rejected the “misperception” that insurers are overcharging customers for bigger profits. It also rejected the idea that a lack of competition was driving up insurance prices.
In its submission, ICA said consumers "have a strong choice of insurance providers, offering a range of products at competitive premiums."
"No significant insurers have left the market in northern Australia in the past decade,” the industry body wrote. “However, some have modified their underwriting requirements over time, avoiding properties where the risk is considered beyond their capacity to service or expertise to manage.”
ACCC noted in its issues paper, however, that there remained "fewer insurers operating in northern Australia, particularly for home and contents insurance,"
AFR reported.
ICA said insurer performance in northern Australia remained "satisfactory, not strong," and that not only was it more expensive to insure in the north, rebuilding costs were also 42% higher than in the south.
"Net profit after tax for the year ended September 2017 for the industry was $3bn.” the industry body said. “This is down from $3.1bn in the previous year, and down about 25% from the 15-year average of about $4bn."
The Turnbull government already confirmed that it would not intervene in the insurance market in northern Australia, ruling out the possibility of a reinsurance pool or a cyclone mutual, the report said.
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