Homeowners to see 'up to 46%' discount from pool
Homeowners in northern Australia with the most acute insurance cost pressures should see premium discounts of up to 46% as a result of the cyclone reinsurance pool, the Federal Government said today ahead of introducing legislation into Parliament.
Strata properties could see up to a 58% discount and SMEs up to a 34% saving from the pool, with about 880,000 property policies expected to be eligible for cover, a media release says. But the Insurance Council of Australia (ICA) said today it is too early to “fully understand the impact on premiums”.
The Government says it intends to introduce the legislation this week and the pool, backed by a $10 billion guarantee, is on track for the scheduled July 1 start date.
Assistant Treasurer Minister Sukkar says the Government has listened to feedback during the consultation and design process and has committed to a Treasury review in July next year.
“We are also ensuring that strata properties will more significantly benefit from the pool,” he said.
The pool is expected to reduce insurance premiums by up to $2.9 billion for eligible household, strata and small business insurance policies over 10 years.
ICA says it welcomes today’s announcement but says the Australian Competition and Consumer Commission’s price monitoring role must not “add complexity or costs”.
“We expect insurers will take advantage of the pool to provide additional cover for households and small businesses in northern Australia most at risk, but the next step of commercial negotiations with the Australian Reinsurance Pool Corporation will need to be completed to fully understand the impact on premiums,” ICA CEO Andrew Hall said today.
“To provide long-term sustainable reductions in premiums Australian governments – both state and federal – need to invest in stronger homes and infrastructure that makes communities more resilient to worsening extreme weather.
“We must also improve resilience standards in building codes, remove state insurance stamp duties and levies, and make better land planning decisions that factor in worsening extreme weather and its impacts.”
The Northern Australia Insurance Lobby (NAIL) says positive changes in the final proposed legislation include lifting the commercial strata criteria to more than 50% commercial usage, but more still needs to be done.
The group calls for changes to include accommodation buildings, such as the type of properties used at tourism hotspots including Hamilton Island, Airlie Beach, Townsville, Cairns and Darwin.
NAIL Co-Chairman Tyrone Shandiman says the legislation should be passed as a starting point, with further stage two changes to to be introduced after the 12-month review.
Mr Shandiman also called for insurers to provide affordable insurance for policyholders not eligible for pool savings.
“It would be extremely disappointing if the insurance industry decided to only insure properties covered by the Federal Government reinsurance program, thus creating an even greater crisis for buildings that are not eligible to be part of the proposed reinsurance program,” he said. “This needs to be monitored.”
