Cyclones and floods are part of life in the region but insurance companies have become increasingly skittish about the risk, either hiking premiums or withdrawing entirely from the northern market.
Cyclones and floods are part of life in the region but insurance companies have become increasingly skittish about the risk, either hiking premiums or withdrawing entirely from the northern market.

Weather pricing Queenslanders out of insurance market

AS NORTH Queenslanders wait for the season's first cyclone, growing numbers of property owners across the region are set to face the next storm without any insurance.

Cyclones and floods are part of life in the region but insurance companies have become increasingly skittish about the risk, either hiking premiums or withdrawing entirely from the northern market.

The issue has been simmering for more than a decade but is reaching crisis point as the competition watchdog enters the final stages of an inquiry into skyrocketing prices.

 

 

Property owners are dropping out of the insurance market in north Queensland due to skyrocketing insurance premiums linked to cyclones.
Property owners are dropping out of the insurance market in north Queensland due to skyrocketing insurance premiums linked to cyclones.

The Morrison Government is waiting for Treasury to model a range of new possible funding options that could reduce premiums and is committed to delivering an answer this year.

Its solution is likely to involve a combination of a government-backed reinsurance pool, the insurance company's preferred solution of better building standards and possible reform to land use planning, which is a state responsibility.

Whatever the solution, it will likely have wider implications across the southern half of the country as insurers reassess the price risk of bush fires after this summers' disastrous season.

Prime Minister Scott Morrison has already flagged the need for state governments to reconsider where houses can be built along the east coast.

The Insurance Council of Australia estimates the bill for this year's fires has topped $430 million from about 6000 claims.

With many insurer's already blowing this year's budget for natural disaster claims with months of possible bush fires and cyclones still ahead, it's likely they will take a closer look pricing the risk of bushfires.

In north Queensland those risks and have meant bill shock for businesses, community groups and house and unit owners opening their annual premiums each year.

The ACCC inquiry has running since 2017 and in its second interim report, delivered before Christmas, it found 17 per cent of North Queensland properties were uninsured, compared with a national average of 11 per cent.

It also found the average premium for home and contents insurance in the region was $2400, nearly double the national average of $1300.

 

The insurance industry wants property owners who design and build structures better able to cope with cyclones and floods to receive cheaper premiums. (Photo by Jonathan Wood/Getty Images)
The insurance industry wants property owners who design and build structures better able to cope with cyclones and floods to receive cheaper premiums. (Photo by Jonathan Wood/Getty Images)

Dawson MP George Christensen says the issue is the number one complaint angry residents come to him about with their bills jumping "exponentially" from year to year.

Last year he saw the bill for a community group that had spiked from about $100,000 to nearly $1 million in a year, leaving the "vital" group on the "verge of collapse".

"The problem really boils down to one thing and that's cyclones," Christensen says.

"The insurers are basically pulling out because they don't want the risk or they are pricing themselves to the point where there's not much risk for them."

"The insurance companies might not be explicitly saying (north Queensland is uninsurable) but it's implicit in their pricing and their behaviour."

Late last year, he hosted Assistant Treasurer and Housing Minister Michael Sukkar at community forums and a high-powered meeting with insurance company CEOs.

 

Assistant Treasurer Michael Sukkar met property owners and insurance company bosses in north Queensland last year at the invitations of Dawson MP George Christensen.
Assistant Treasurer Michael Sukkar met property owners and insurance company bosses in north Queensland last year at the invitations of Dawson MP George Christensen.

He said that after years of minsters and governments of all stripes avoiding the issue, Sukkar left "understanding the gravity of the problem".

"His view was basically: it's broken, that the north Queensland insurance market is just not working as it should and there's going to have to be government intervention to address the issue," Christensen says.

The insurance industry has argued against government intervention, preferring a market-based solution such as reduced premiums for properties that are better equipped to face cyclones or floods.

The ACCC interim report says the solution will not come "from a single policy decision" and also raised doubts that government intervention in re-insurance pools would lower insurance premiums.

"Reforms to land use planning and building standards may offer the best hope for achieving sustainable and equitable improvements to insurance affordability in Northern Australia in the future," it says.

 

Insurance companies are likely to start increasing insurance premiums to factor in the costs of climate change.
Insurance companies are likely to start increasing insurance premiums to factor in the costs of climate change.

"This will not directly help existing properties in high risk areas but can help avoid the problem of insurance affordability in Northern Australia becoming significantly worse."

It also found that although climate change issues had not "significantly affected" pricing or supply decisions yet there were "indications insurers are taking steps to better model the future effects of climate change".

Examining internal insurance company documents, the ACCC found the companies were speculating that price increases linked to climate change could "result in affordability issues for some market segments".

"Another of the insurers also indicated that over the longer term, the technical price of insurance will increase beyond mass-market affordable levels," it says.

With a tropical cyclone forming off the Western Australian coast signalling the real start of the season, many north Queenslanders need this problem sorted before the next cyclone comes barrelling towards their uninsured property.