Report shows savings much less than forecast
A SMALL number of high-risk homes could see premium reductions in the order of 38 per cent from a government-backed cyclone reinsurance pool, a report to government says.
But for low-risk properties any savings may be difficult to observe, while for strata and businesses the pool says any savings could not be reliably estimated.
The estimates differ from claims made by the LNP during the election that the pool was expected to provide savings of up to 46 per cent for homeowners, 58 per cent for strata properties and 34 per cent for small and medium businesses.
The LNP government passed legislation earlier this year to implement the pool from July 1 to lower insurance premiums by reducing the cost of reinsurance for cyclone cover. It is limited to domestic property wholly or mainly used for residential purposes with a $5m insured limit applied to small and medium enterprises and commercial property. The report, Cyclone Reinsurance Pool – Summary of the Actuarial Premium Rate Assessment by insurance consultant Finity, says the savings are achieved by removing a profit margin from reinsurance and having low-risk properties cross-subsidise medium and high-risk properties.
“For Northern Australia policies in our sample, overall savings in the order of 15-20 per cent are estimated across home, strata and SME insurance,” the report says.
“A small number of policies currently paying the highest premiums (more than $10,000 for a $500,000 sum insured for home), the premium reduction can be in the order of 38 per cent. “The small and non-representative samples for strata and SME mean that the estimated savings for the highest risk bands cannot be reliably estimated.”