ICA disappointed by Northern Australia inquiryJuly 31 2019 by Andrew Tjaardstra
According to the second report from the Australian Competition and Consumer Commission’s (ACCC) Northern Australia insurance inquiry, higher costs and heavy losses incurred as a result of natural disasters result in premiums that are on average much higher in Northern Australia compared with the rest of the country.
While it notes that insurance remains unprofitable for insurers, the ACCC calls for a price comparison site to help customers and is looking at a government-backed reinsurance pool.
Reacting to the report, Insurance Council of Australia chief executive Rob Whelan said: “The industry has emphatically supported the most powerful recommendation in the ACCC’s first report – that state stamp duties on insurance be abolished – because it will have the most direct and immediate impact on the affordability of insurance in northern Australia. Unfortunately, no progress has been made.”
Whelan added: “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 A$200 million (US$138 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.”
Whelan continued: “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 [the Australian Securities and Investments Commission], already provides premium comparisons for householders in northern Australia.”
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