NIBA set to appear at cyclone pool inquiry hearing
The cyclone reinsurance pool as currently designed won’t assist people affected by related flooding after an initial 48 hours and doesn’t provide incentives for insurers that have left the market to return, the National Insurance Brokers Association (NIBA) says in a submission lodged ahead of a scheduled appearance tomorrow before a parliamentary inquiry.
The Joint Select Committee on Northern Australia is holding a one-day hearing into the pool amid concerns that insurers are proving slow to join and that its design may limit potential benefits to consumers.
NIBA CEO Phil Kewin and Queensland Divisional Chairperson Steven Hill are expected to appear tomorrow morning via videoconference.
Also scheduled are the Australian Consumers Insurance Lobby, Insurance Council of Australia, QBE, RACQ, Allianz, IAG, the NT Chamber of Commerce, Townville Chamber of Commerce, Australian Competition and Consumer Commission, Department of Treasury, Bureau of Meteorology and the Australian Reinsurance Pool Corporation.
NIBA in its submissions says a large number of towns and regional centres are not affected by cyclones but are impacted by flooding once the cyclone turns into a tropical low, and they are facing high premiums as a result of the risk.
“The reinsurance pool is unlikely to provide any relief for those who reside in these areas, as the flooding does not usually occur until after the proposed ‘damage period’ has finished,” it says.
NIBA also notes that the pool doesn’t provide any incentive for insurers that have exited the Northern Australia market to return or for those that are still active to join the pool earlier in the transition period.
Feedback from NIBA members indicates few insurers are willing to write cover for cyclone-exposed risks and of those that do, a number have placed embargoes on new risks.
The current legislation requires insurers to use the pool with respect to eligible cyclone losses, while those that write cover for other types of risks, or have ceased writing for cyclone risks by the date they are scheduled to join the pool, are not required to participate.
NIBA notes there is nothing preventing these insurers from gradually declining to renew existing cyclone-exposed risks until eventually they are no longer required to participate.
“Furthermore, insurers may refuse to provide cover to properties that are not eligible for the reinsurance pool, further exacerbating the issues raised by NIBA and other associations in regard to the eligibility of properties,” it says.
“In NIBA’s view, this directly contradicts the pools’ aim to increase insurer participation and competition in the Northern Australia market.”
The submission is available here.
