Household insurance ‘remains unprofitable’ in Northern Australia, finds the Australian Competition and Consumer Commission
An inquiry examining Northern Australia’s insurance market has confirmed that providing household policies in the region “remains unprofitable for insurers”.
Insurers face higher costs and heavy losses as a result of natural disasters in the region meaning the premiums for these policies are on average much higher, according to the latest findings from the Australian Competition and Consumer Commission’s (ACCC) Northern Australia Insurance Inquiry.
Rob Whelan, CEO of the Insurance Council of Australia (ICA), said “[The ICA] respects the broad aims of recommendations that seek to improve transparency and product availability to customers. Insurers will consider practical solutions that do not overwhelm customers with information.”
He said the industry has “emphatically” supported certain recommendations in the ACCC’s first report, for example abolishing state stamp duties on insurance, because it will have the most direct and immediate impact on the affordability of insurance. However, he said it was unfortunate that no progress has been made.
“Insurers also support the ACCC view that mitigation can improve affordability. Again, little progress has been made despite the Productivity Commission recommending the Federal Government invest at least AS$200 million a year in permanent mitigation and resilience measures, to be matched by state and territory governments.
“The industry is disappointed that the ACCC is examining several flawed ideas – a government-backed reinsurance pool, mutual and direct subsidies – despite these options having been the subject of previous inquiries and found to be unviable and too expensive.
“These initiatives have been tried in other countries and have failed to address the fundamental issue of reducing the risks through better planning, building and mitigation.
Insurance in Northern Australia should not be subsidised by the rest of the nation; this would be unfair and unsustainable.
“Insurers do not support a national price comparison website for home insurance because it will not deliver useful information, since consumers in other parts of the country do not face the same level of risks as those who live in the north. A comparison website, run by ASIC, already provides premium comparisons for householders in northern Australia.
“The insurance industry would have preferred the ACCC offer practical recommendations that address the key drivers of pricing and availability of insurance in northern Australia – the high risk and impact of natural disasters (in particular cyclones and floods), high costs of materials and trades, inadequate building controls and poor-quality building stock.”
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