Insurer Suncorp has added its voice to the group of politicians and insurers dissenting from the Australian government’s proposal to create a state-backed cyclone insurer or reinsurance pool, arguing that it would be unfair to Australian taxpayers and inefficient compared with risk mitigation efforts.
Last year the government issued a report after investigating ways to reduce high insurance costs in North Queensland, which suggested a state-backed re/insurance solution was necessary along with steps to mitigate risk.
Initial opposition seemed to have killed off the proposal, but in the aftermath of Cyclone Debbie it appears to be back on the drawing board, pushed forwards by the regions’ parliamentarians seeking a better deal for hard-hit constituents.
Suncorp Insurance Chief Executive Officer (CEO), Anthony Day, said; “Reducing the risk leads to increased competition and significant price reductions in premiums.
“A government mutual would merely paper over the cracks and not address the heart of the problem in the north – the high risk of cyclones devastating whole communities, flattening homes and neighbourhoods.
“The Government should be willing to listen and act on the strong advice of its own inquiries.”
Suncorp said the Northern Australia Insurance Premiums Taskforce commented that government intervention would fail to achieve its aim of reduced premium costs; “The mutual and reinsurance pool options generate a similar premium reduction and similar potential cost to Government over 10 years. If either option were to run along commercial lines, there would be no reduction in premiums.”
The Taskforce said a compulsory mutual cyclone insurance scheme would likely have a major impact of the insurance market in northern Australia and argued the increased costs to taxpayers would defeat the purpose of the proposed intervention that aims to reduce insurance costs; “The larger the reductions to consumer cyclone premiums, the larger the likely cost to Government from taking on increased risk from cyclone damage.
“The premium reduction would come at a significant cost to the Government, although the cost of options to achieve a larger reduction in premiums would be even higher.”
The Insurance Council of Australia (ICA) has also lobbied against the controversial state cyclone reinsurance pools, but insurer Allianz has spoken out in favour of the proposal, the Courier Mail said.