This article about ACCC Northern Australia Insurance Inquiry has been supplied by Tyrone Shandiman, Strata Insurance Solutions.
The Australian Consumer & Competition Commission (ACCC) has released an update report, the ACCC Northern Australia Insurance Inquiry, for their inquiry into the availability and affordability of strata insurance and home and contents insurance across North Australia.
In Queensland, the ACCC held forums in Townsville, Cairns, Rockhampton, Mackay and collected information from a range of key stakeholders including local residents and property owners, insurers, insurance brokers, strata managers, actuaries and other consumer representative and advocacy groups.
The report hasn’t handed down any major findings yet and it is expected the November 2018 report will do so, but it has provided some interesting insight into strata insurance in North Queensland.
The ACCC singled out strata insurance markets in Northern Australia as being a particular area where there is little choice. The National Insurance Brokers Association suggested that it was likely due to the unwillingness of insurers to underwrite in high-risk regions as simply a commercial decision, as supplying insurance in north Queensland has not been very profitable for insurers.
In 2016/2017 the ACCC estimates there were approximately 180,000 strata insurance policies provided by insurers across the country. Of these, approximately 7,500 (or 4%) were in northern Australia with the majority (6,000) being in north Queensland.
Despite only making up 4% of all policies, Northern Australia makes up 8% of the national strata market by total premium or $38million of the $410million of premium collected nationally.
The report found that the average premium per $1,000 insured for a strata property insured in North Queensland was three times the amount for a property insured outside of Northern Australia. It has been Strata Insurance Solutions experience that properties insured in North Queensland will pay as much as five times more than like properties insured in Brisbane in many instances.
Based on a cost per $1,000 insured, in the ten years between 2007 & 2017, strata insurance premiums rose by 82% in North Queensland. North Queensland, in particular, experienced sharp premium increases between 2010 & 2013 while the rest of Australia has remained relatively stable over the last 10 years.
On the basis of what the ACCC has reported that insurance premiums paid in North Queensland are approximately $582million ($38million for strata and $544million for home & contents), we estimate the Queensland government would collect between $55-$60million in stamp duty. The November 2018 report will consider the effect of stamp duty in more detail.
ACCC Northern Australia Insurance Inquiry
This post appears in Strata News #195.
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. This information is designed as a basic guide with relation to cover and you should refer to your Policy Schedule and Product Disclosure Statement for all terms and conditions related to cover under any insurance policy. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.
Northern Australia Insurance Premiums Task Force Interim Report Released
August 2015 – Written by The LookUpStarta Team: This week saw the release of the Northern Australia Insurance Premiums Taskforce Interim Report. The report was forwarded to me by Ms Margaret Shaw, Northern Australia consumer representative on the task force.
The task force was formed in May, earlier this year, to explore the available options for reducing home, contents, and strata insurance premiums in Northern Australia.
This post provides a quick summary of the Interim Report by pulling out some of the key ideas within the document, including some comments by Margaret Shaw. We suggest that the article would be best read alongside The Northern Australia Insurance Premiums Task force Interim Report. The report can be accessed via this Australian Government Treasury page.
Page 2/3 – Purpose and approach of the Taskforce. “A competitive market will best serve the long-term interest of the consumers in northern Australia and it is important that the options being considered support competition.” Margaret Shaw points out the importance of consulting with experts in cyclone mitigation in this process.
Page 10 – The causes of the increase in premiums. This section of the paper submits that there is no reason to suggest any changes in the behaviour of the policyholders, “[r]ather the causes of the
premium increases were changes in the behaviour of insurance companies”.
Page 18 – Effect on economic activity. “High insurance premiums can contribute towards lower consumer consumption and reduced levels of confidence.” Margaret Shaw agrees with the importance of this point and comments that it applies to not only Cairns but Townsville and other areas as well.
OPTION 1: A MUTUAL INSURANCE COMPANY OFFERING CYCLONE COVER TO HOUSEHOLDS
Page 32 – Impact on insurance and reinsurance markets and premiums. Some feel that a cyclone mutual insurer, supported by the Government would deter “a competitive private sector market for insurance in northern Australia”. However, it is suggested that some companies may wish to return to the market to offer non-cyclone insurance policies “if another party was willing to hold the majority of the cyclone risk” – possibly resulting in a more competitive non-cyclone risk market.
OTHER APPROACHES RAISED BY STAKEHOLDERS
Page 39/40 – Commissions to body corporate managers. This issue raises its head again – “Some stakeholders have called for stricter regulation on the commissions that are paid to body corporate managers. The activities of body corporate managers are governed by legislation at the state or territory level.”
Therefore, some stakeholders have called for a variety of reforms, including “require insurers to provide disclosure on the individual components that make up the overall cost of the premium”.
Page 43 – Mitigation assessments for houses discusses the assessments initiatives that are currently underway, including the Governments commitment to $12.5 million in funding to establish a Strata Title Inspection Scheme providing “grants to body corporate managers for building assessments in northern Queensland”. Other risk assessment programs are also mentioned.
Throughout the document, there is a reference to statistics that are still not available. It is mentioned that these statistics will be taken into account in preparation for the final report, due end of November 2015, as they become available. Margaret Shaw has also requested clarification on some of the issues raised in the report. We will supply you with more information as it comes through.
This article is meant as a quick overview, pulling out some of the main points made in the report.
Update on the Insurance Crisis in North Queensland – Part 3
January 2014 – Written by The LookUpStarta Team: This information about North Queensland strata insurance was supplied to us by Margaret Shaw. Margaret Shaw is the Treasurer of Seastar Apartments and a retired IT Consultant. In 2011 the insurance for her complex of 25 apartments (spread over 7 separate buildings) went from $25,000 to $81,000 overnight with no warning. She has been fighting the 200-800% increase in insurance premiums, particularly for strata properties, ever since.
On Tuesday 17th December I was very honoured to receive an invite to a meeting with the Assistant Treasurer, Senator Arthur Sinodinos, who was visiting Cairns on Thursday, December 19th.
Senator Sinodinos has been very proactive behind the scenes in driving the Coalition Government’s response to the insurance situation, including bypassing the Insurance Council of Australia and working directly with several major insurers who support industry-driven change. The meeting was scheduled to be held prior to Senator Sinodinos and Mr Entsch outlining to local media the Federal Government initiatives to help rein in costs and ensure more affordable insurance premiums in North Queensland, so I drove up on Wednesday and have just got back.
I met Warren and the Senator at the offices of 4CA radio who have been very supportive of the fight for fair and affordable insurance premiums, and we had a brief chat before going on air.
The afternoon meeting itself was very small and consisted of the Senator (who seems genuine), Warren Entsch MP, Ewen Jones MP, and eight other people consisting of: the CEO of Cairns Chamber of Commerce; a representative of the Queensland Chamber of Commerce; an Insurance Broker who specialised in Rural Industry Insurance; the General Manager North Qld of JLT insurance broking; 2 members of Archers Body Corporate Managers; a lady who specialised in rural innovation and represented the rural communities who cannot get insurance for their products once they have left the farms and are in transit; and ….. me.
The Senator explained the Federal initiatives and asked all of us whether we had additional items we wanted to bring up – the meeting ran over time. Basically, the Federal Government is pushing:
- The insurance industry should be forefront to the solutions rather than State or Federal Governments creating their own insurance company
- Transparency in the industry, quotes, invoices and premium calculation
- A aggregated web site for premium comparison
- The Australian Actuary (Peter Martin) is being asked to come to North Qld and take actual examples to compare our costs with other areas of Qld and Australia – that’ll be novel as he didn’t set foot here last time he did a report
- They are going to look into 3rd party commissions
- To encourage overseas insurers to our market
- Expand the JCU investigation into flood mitigation to encompass cyclones.
We were also informed that during a meeting with Suncorp earlier this month it was admitted there had been market failure in North Qld (Rockhampton and above).
I came away extremely enthusiastic about the whole thing and the speed at which developments were planned to take place. I thought the Channel 7 News report did not do the meeting justice, we may not get back to normal within a year but plans are afoot to help the situation well before then. Please see below for the media release from my Federal MP: ‘New government hears insurance calls’.
PS – IAG is buying Wesfarmers underwriting business (Lumleys, WFI and Coles insurance) for $1.85 billion, so there’s even less competition now.
New government hears insurance calls
NORTH Queenslanders stuck with ridiculous insurance premiums finally have a voice with the new Liberal National Government, according to Federal Member for Dawson, George Christensen.
Mr Christensen has been calling for intervention in the North Queensland insurance market for more than two years, proposing specific actions to alleviate the problem. Now those calls are being answered.
The Liberal National Government today announced a range of measures to reduce insurance costs in North Queensland, including luring overseas companies into the market, greater transparency, and fairer assessments.
“These are solutions I and my North Queensland LNP colleagues have been putting forward for the past two years but the previous Labor government refused to act,” Mr Christensen said. “They even refused to implement recommendations from their own report: In the Wake of Disasters – The Affordability of Strata Title Insurance.”
The Liberal National Government’s announcement in Cairns today flagged the possibility of greater competition by allowing major Asian insurance companies to set up business in North Queensland, creating a website to compare insurance premiums, and making insurance companies use more accurate information on individual properties when writing policies.
“You only have to look at premiums that have risen five- and ten-fold in the space of two years to see the market is not sustainable,” Mr Christensen said.
“When there is only one or two companies offering some types of insurance premiums across North Queensland, the market has failed and the government must intervene.”
Mr Christensen said he had received reports of people dropping their home insurance cover because they could no longer afford it.
“In the case of strata title insurance, that is not possible because bodies corporate are compelled by law to take out insurance.
“If the best offer a body corporate can find is ridiculously high, they have to accept it because they have to comply with the law.
“The previous Labor government refused to listen to how desperate the situation was in North Queensland.
“Now we have a government prepared to listen to people and to take action so we will be moving quickly to restore some common sense to the insurance market in North Queensland.”
Update on the Insurance Crisis in North Queensland – Part 2
December 2013 – This information about North Queensland insurance affordability was supplied to us by Margaret Shaw.
Regarding the meeting 28th November 2013 between Federal and State members on insurance in Brisbane.
Premier Newman says:
- They want more details taken on location and building codes rather than just the postcode to rate for premiums;
- They’re going to look at flood mitigation in detail and expect premiums in flood-prone areas to reduce if mitigation action is taken;
- The Federal Government is looking at a regulatory role and is going to get the Government Actuary to look at strata insurance again – hopefully, this time he will set foot in North Queensland;
- They are going to look to see if it is appropriate for Body Corporate Managers to be paid commission by insurance companies – a clear conflict of interest in my mind.
They’re going to have a good crack at this because premiums are causing a problem to the 30-year plan for expansion in the north. In addition, those insurance companies who are still in the market are overexposed so they must get further competition in the market. Building codes were changed in 1975 and should be taken into account. Mr Newman stated he was under the impression that damage due to Yassi was in the majority pre 1975 buildings.
They hope to make an announcement prior to Christmas probably after the COAG meeting in December and I have attached a copy of the State NQ 10 point plan.
Warren Entsch is pushing to sideline the Insurance Council of Australia who he has described as “as useless as a pocket on a singlet”. He feels they have done nothing to help the insurance crisis and have been in denial about market failure or even that North Queensland has a problem. This is even though Campbell Newman has mentioned market failure and the Queensland Commerce has used the terms “insurance rorting” and “insurance gouging”. I could not agree more as I believe those pushing for insurance reforms including myself have been described as “part of the lunatic fringe” – I consider this a compliment.
Warren is suggesting Australia allow overseas insurance companies access to the Australian market, something they do not presently have. This should increase competition in the market.
Also….. he feels if a company operating in Australia is offering a product, then that product should be offered to the whole of Australia or not at all – stop the cherry picking. At last!!!
We are getting somewhere and we will win.
Update on the Insurance Crisis in North Queensland
November 2013 – This information about the crisis in strata insurance QLD was supplied to us by Margaret Shaw.
I will try to make this brief but so much has happened in the last couple of months and I am feeling tremendously optimistic at the moment as a number of things are coming together after more than 2 years of fighting:
- Tony Abbot wants to open North Australia and that can’t happen whilst the insurance is out of control.
- Warren Entsch MP is now the chair of the White Paper into how to open North Australia and has insurance as one of his top priorities. George Christensen has also been invited onto the Committee.”In addition, the insurance issue will also be front and center in the Northern Australia White Paper.”
Source: October 15, 2013 Warren Entsch pushes for talks on insurance crisis in Far North Queensland, Nick Dalton, The Cairns Post.
- The insurance companies now have free access to Council flood data rather than use the dodgy out-of-date QRA details (Queensland Reconstruction Authority) “By releasing this information through the MOU, insurers will have access to the most accurate spatial and elevation data and this should have a significant impact on property insurance in Far North Queensland”.
Source: 16 October, 2013 Warren Entsch MP Media Release: No excuse for unnecessary flood cover says Entsch.
- Warren Entsch MP is pushing the roundtable of Federal, State, Insurance Companies and the Insurance Council to make it happen…. and I understand it is planned for 27th November (yet to be confirmed). It comes as business leaders revealed soaring insurance costs had reached breaking point and was a “hot topic” of conversation at last week’s Chamber of Commerce and Industry Queensland’s Far North annual meeting. The Leichhardt MP said he had been campaigning on the issue for the past three years and had not given up.”I’m aware of many businesses and individuals who are being forced to either under-insure, negotiate very high excesses, or not insure at all, and it is extremely serious,” he said.
Source: October 15, 2013 Warren Entsch pushes for talks on insurance crisis in Far North Queensland, Nick Dalton, The Cairns Post.
- Campbell Newman has suddenly recognised we have a problem AND has used the term “Market Failure”.His MPs will hold a meeting on Tuesday (28th October 2013) to determine just how they can reduce the insurance burden on homeowners and businesses including unit owners, who claim their premiums have increased by 300 to 800 per cent in recent, disaster-prone years. Everything is on the table including a possible moratorium on the state-levied insurance duty which was increased this financial year from 7 per cent to 9.5 per cent to raise an additional $195 million.”We can’t have growth in north Queensland and far north Queensland while it’s being held back by almost punitive levels of insurance premiums,” Mr Newman said.
“There’s got to be some mechanisms, some policy changes, some rules and regulations for the insurance industry which mean that people in the north see competition coming back in.”
Source: October 28, 2013 Queensland Premier Campbell Newman says skyrocketing insurance premiums are holding back economic development in state’s far north Sarah Vogler, Courier Mail.
According to Gavin King MP, 7 members of the State Parliament were present at the meeting. Suncorp gave a presentation as they have 65% of the insurance risk in the area. I know this is mainly house insurance as SUU has the highest % of strata insurance. The Insurance Council of Australia was also there.
The State is going to try and increase the data provided to insurance companies to stop ratings by postcode. It was pointed out that no-one actually ever views the properties and, where with contents insurance there are a lot of questions asked, with building insurance there are very few. The State is also going to review the findings of the Inquiry held in February 2012 (about time too).
I understand State members have 2 weeks from 28th October to come up with their suggestions, and then there will be a week before the roundtable due 27th November (TBC).
- Campbell Newman has recognised that there is no individual risk assessment.”The region is seen as being risky and changes to the building and construction codes aren’t being taken into account. There is no competition and the fundamental problem is that they see it as a risk.”
Source: October 24, 2013 Premium woes are ‘priority’: Newman Christie Anderson, Townsville Bulletin.
- The State Government have a goal to have half the state’s population living in regional Queensland by 2043Premier Campbell Newman yesterday implored regional councils to begin planning for future growth by examining a range of options, including increasing building height restrictions, to lure residents from southeast Queensland. But Mr Newman has also acknowledged insurance was one of the biggest issues facing the regions and has promised to work with the Federal Government to come up with a solution. Property Ladder Realty director Linda Tuck said she was aware of some highrise apartments where body corporate fees, inflated by hefty insurance premiums, cost homeowners up to $20,000 a year.
Source: October 24, 2013 Experts warn insurance costs must be brought under control in Far North Queensland before highrises can be built, Liam Parsons, Cairns Post.
- A meeting took place on 6th November in Sydney between the Assistant Federal Treasurer, Senator Arthur Sinodinos, and the CEOs of some of the major insurers to discuss where the industry is at and raise concerns about the situation in North Queensland. I would have liked to be a fly on the wall at that meeting!!
Sen. Sinodinos outlined to the insurers that there is a problem and as a Government, we have to act on it, but they weren’t overly impressed with that apparently! He made a number of suggestions to them but their response was pretty lack-luster, not that that’s a surprise.
Sen. Sinodinos isn’t going to let that stop him though, the relevant MPs are getting together in the second sitting week to go through a new paper that was produced by his office around election time (we haven’t seen it yet) before the meeting in Brisbane the week after that.
So all-in-all it has been an interesting couple of months. I will keep you informed.