Insurance prices ‘realistic’
THE Insurance Council of Australia believes there is ‘‘no price gouging’’, just insurance premiums accurately reflecting the risk of North Queensland.
Rising insurance premiums in the strata title market are now being seen across other markets including residential and business.
The Queensland government has finally responded, signing a memorandum of understanding with the ICA, which included providing insurance companies free access to their existing and future flood mapping and elevation data, to ensure accurate premiums.
ICA general manager media and communications Campbell Fuller said it is now up to the local governments, such as the Cairns Regional Council, to provide access to their data to ensure insurance companies have the most accurate information.
‘‘We are working with local government right across Queensland where they have their own data, encouraging local government to share that data with insurance companies,’’ Mr Fuller said.
‘‘For North Queensland however, flood risk is a very small proportion of the premium. It really is storm and cyclone risk.
‘‘What we are doing is talking to the governments about how properties in North Queensland can be more resilient to the risk, one of the misconceptions about cyclone code buildings is they are cyclone proof.
‘‘The cyclone code is designed to protect inhabitants of the building, which it has been very successful – the number of people killed in cyclones is quite low, but the code does not address the issue of damage to the building itself.’’
Mr Fuller said they are working with state government to look at how buildings can be constructed or modified to be more resilient against storms and cyclones and reduce the risk.
‘‘We understand that consumers aren’t enjoying the high prices but they reflect the risk attached to property in that area – one of the most disaster prone areas of Australia,’’ he said. ‘‘A lot of people in North Queensland for some reason don’t seem to understand in the natural disasters of the last three-years, Queensland has been about 50 per cent of insurance losses.
‘‘Since 1970 15 cyclones have come within 100km of Cairns. This season we can expect four cyclones to form off the coast and any one of those could cause significant damage. Even when Cyclone Oswald turned into a tropical low it caused $1 billion damage to Queensland alone. Insurers look at the risks accordingly.’’
Another factor causing the rising insurance premiums is the insurance companies trying to cover the cost of risk over a smaller population in North Queensland.
‘‘Cyclones cause multibillion dollar damage in Queensland across a relatively small population base, and insurance companies are trying to collect premiums across communities to share the load,’’ Mr Fuller said. ‘‘When you collect money across a relatively small community that suffers with very high levels of damage it flows back into premiums. Insurers look at Queensland in particular and shake their heads.
‘‘When central west Queensland flooded in Charleville and Emerald, one big insurer had collected $2 million in three years and paid out about $ 150 million in rebuilds. The insurer announced they would no longer write new policies in Roma until levies were built because Roma had been hit by three floods in two years, and now that they have announced a levy insurers have started writing premiums again.’’
Until the risks are reduced in North Queensland, premiums will continue to remain high and competition low, however Mr Fuller said the government’s MOU has been a step in the right direction. ‘‘The government has made giant steps towards providing better data and local governments have done their own flood mapping for town planning and infrastructure purposes.
‘‘If local government hasn’t already provided that data to the insurance council we encourage them to do so, the better the data the more fine-tuned the policies can be for premiums,’’ Mr Fuller said.
‘‘The insurance industry is very aware of concerns in North Queensland and they are not ignoring them, it’s about looking at how best to address them from our perspective and other stakeholders.
‘‘There’s not a quick fix to any of these things; insurance companies acknowledge there’s an issue but the industry has a responsibility under the law to operate on a commercially prudent basis, including capital requirements to cover risk. They are businesses and those busineses are putting their shareholder’s money up as protection.’’
The Insurance Council of Australia is waiting on a report to be released in the next couple of months by James Cook University, an independent study looking at strata title building insurance and the properties.
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