Plans for an insurance aggregator for strata in North Queensland has been given a thumbs up by the Institute of Actuaries, followed by a warning that it will not address the fact higher prices in North Queensland reflect higher risks.
Responding to Federal Treasury’s discussion paper on Addressing the high cost of home and strata title insurance in North Queensland, the institute says the market is not competitive due to the small size of the North Queensland strata title insurance market and the “perceived risk/reward trade off”. It says this results in the competitive market forces being weaker than in larger market segments.
Suggesting that an aggregator could be positive for the policyholder, it says: “The development of an insurance website/aggregator will enable people to more readily compare premiums and policy features which is a positive result. However, it will not address the fact that higher prices in North Queensland reflect higher risk than other parts of the country.”
The submission goes on to warn that allowing foreign/unregulated insurers into the market could potentially set a precedent that would undermine the 1973 Insurance Act's objective of consumer protection.
“Significant capital and risk management requirements are required for domestic insurers to ensure that insurers have sufficient capital to meet their liabilities, even after a big event such as a cyclone. If insurers with lower capital and/or risk management standards are permitted to enter the market, this could not only result in an unfair playing field with domestic insurers but could also result in an insurer unable to keep their promise of paying claims after a significant event.”
The institute also suggested the government, in promoting resilience in North Queensland, could play a more active role in enhancing building standards to focus more on mitigating the risk of property damage from cyclones. It criticises current building standards, particularly codes around cyclone proofing, for only focusing on achieving structural integrity of buildings, and paying no attention to minimising the cost of damage to properties beyond the main building structure such as satellite dishes and solar panels which, it argues, usually drive higher insurance losses.
Finally, it asks for consideration for the types of building materials that are approved in building standards for cyclone prone areas.
