Local insurance premiums to rise by up to 350 per cent
NEWS of an unprecedented hike in insurance premiums by more than three-and-a-half times existing rates for strata title and body corporate entities in North Queensland has sent shockwaves through the local property market.
Major insurer, Zurich Financial Services, says the new premiums will apply for any strata premium renewal from February 6 in a bid to minimise the exposure caused by a rapid accumulation in North Queensland residential strata business after the exit of other insurers.
But strata title owners and body corporate managers have warned of far-reaching ramifications for the local economy and vowed to boycott Zurich in protest.
“It’s un-Australian. They can go back to bloody Switzerland,” says a devastated John Carney who was hosting an Aussie Day barbecue yesterday with his mates, many of whom are in the property industry, when the news filtered through.
“It is the worst possible news at the worst possible time for Port.
“Strata properties in this town have already experienced drops of 20 to 50 per cent, in some cases more than that, and returns have been so minimal for so long, it’s quite disgraceful to think this can be thrown at us now without justification.
“The town’s in meltdown as it is, this is going to turn us into a basket case.”
Mr Carney - who owns the management rights of the 66-apartment complex Paradise Links - said only last year, his body corporate premi- ums from $36,000 to $72,000.
“Last year they doubled it, now they want to more than treble it - what business can absorb increases like that? I’d like to know,” Mr Carney said.
He predicted it would force a “massive fire sale” by investors caught up in the most challenging market conditions imaginable.
“There’ll be even less return for those investors,” he said. “They can’t sell because there’s no demand and even if there was, banks aren’t lending, and they won’t be able to afford to hold on so what else can they do?”
Commercial property owner Mal Phillips warned of repercussions as the industry united to express its anger about being used as a “cash cow” by insurance companies.
“I have been insured with Zurich personally for 30 years,” Mr Phillips said.
“For them to pull a stunt like this, they may find the backlash is much greater than they anticipated once brokers realise what they’re up to.”
Mr Phillips lamented the sell-off of government insurance offices over the years which had left the community “at the mercy” of market forces.
“Their role was to keep the bastards honest so premiums remained at a level that was accessible to the public while maintaining an acceptable level of exposure,” he said.
Century 21 principal Phil Holloway said Zurich should release its statistics on claims made by strata properties in North Queensland otherwise the premium hike would continue to be seen as the “money grab” it clearly was.
“I don’t see why we should be punished for the flooding disaster that has hit the south-east corner of the state,” Mr Holloway said.
Ironically, while Zurich sought to minimise its exposure to catastrophe payouts in the event of a cyclone, Port Douglas and Cairns had mercifully remained largely unaffected by natural disaster.
But Zurich’s state manager Damien Gallagher has advised customers the action was necessary to ensure its products were at a “technically sustainable price”.
“Our own portfolio has grown significantly as brokers and policy holders source the remaining markets available to them,” he said. “In North Queensland, strata business now represents more than 35 per cent of our portfolio nationally”.