IN all my time in politics, few issues have required as much perseverance, or generated such a surge of community support, as that of working towards a way out of the North’s property insurance crisis.
When people are forced to leave their most valued possessions their homes and their businesses uninsured and unprotected, it beggars belief that those at the highest levels can continue to deny there’s a problem.
The Private Member’s Motion that I have drafted is comprehensive, seeking to address a range of issues relating to insurance including the evident market failure, the availability and affordability of the product, the legal requirement for mortgage insurance, the resulting financial and personal stress on families, and the need for investigation into government underwriting of insurance. It is now awaiting approval.
Unsurprisingly, it has already met with resistance from the Insurance Council of Australia, which has reiterated that it doesn’t believe there is a problem. This ‘head in the sand attitude’ is proving to be extremely damaging and shows that they have little understanding of the challenges facing our community.
Back in January of this year, in their submission to the inquiry into the affordability of strata title insurance, the ICA stated that;
“..whilst strata unit owners have experienced premium increases, those increases have only raised premiums to a point below or on parity with what is already being paid by householders in the same areas.”
Ten months on, and I’d love the opportunity to walk into their head office and drop on the desk a stack of examples to show them that the issue is now far from restricted to strata title.
From across Northern Queensland, I have been contacted by home owners, landlords, businesses, rural properties and tourism icons. For many, the issue is now not about huge increases, but about finding any cover at all after being repeatedly rejected by both domestic and international insurers.
In Cooktown, the Hillcrest Guest House has been uninsured since January, and the iconic Lion’s Den pub since March, both unable to get any cover due to their location. The Hillcrest is a renovated 1880 Queenslander that has never had a claim; the Lion’s Den has been operating continuously for 125 years with no major damage from any natural or unnatural event.
We are now getting examples where banks are issuing ‘show cause’ letters one Cairns guest house had 13 rejections and now cannot meet the requirements of their mortgage.
Cairns property manager Linda Tuck tells me that insurance with Vero on her residential home has gone from $900 two years ago to $2929.72 with a $1000 excess. “Shopping around”, as recommended by Jan McLucas, resulted in quotes from five other providers ranging from $4847 (AAMI) to $6846 (Coles).
Yet quotes using an identical property, but in different postcodes, reveal that cover in Perth, Melbourne or even flood-ravaged Brisbane would cost between $1200-1300. And surprisingly, in Darwin, insurance could be purchased for $1633 despite cyclone Tracy in 1974 completely destroying the city and killing 71 people.
In response to the ICA’s stance, I have passed on many of these case studies to illustrate not only people’s financial challenges, but the emotional toll they face in struggling to find cover for their properties. I dare the ICA to repeat, “There is no problem” after reading these.
Concern has also been raised about the financial implications of what is seen as ‘government interference’ in the insurance industry, especially in relation to underwriting of risk or the subsidising of policies.
The ICA’s view, according to their submission, is that it will “distort the market” and encourage inappropriate development in risk-prone areas. The Government’s view, in their response to the January inquiry, was that there was “no merit in the Australian Government entering the market for strata insurance”.
When faced with events of a similar nature but far greater impact, disasters, the governments of New Zealand, Thailand and Japan stepped up to the challenge and
What many people don’t realise, and the industry/government is unwilling to publicise, is that within the last decade the government has already intervened in the insurance industry and successfully.
In 2003, following the attacks of 9/11 and the withdrawal of terrorism insurance cover by insurance companies, the Howard Government established a scheme for replacement terrorism reinsurance for commercial properties.
Titled the Australian Reinsurance Pool Corporation, it was “introduced as a result of calls for the Government to intervene in an area of clear market failure and after discussions with key industry stakeholders.”
The scheme has just been reviewed for the third time and is set to continue for another three years, with the Government directing the pool to pay a dividend to the Commonwealth of $400 million.
Now, there is little doubt that there has been market failure in the provision of property insurance in Northern Australia. Although the idea of expanding the pool to include residential buildings did come up in the inquiry’s recommendations, and was dismissed by the Government in their response, it is clear that terrorism risk is not the primary concern of property owners in this region.
My question is, why can we not get access to these funds or a similar mechanism to help people living above the Tropic of Capricorn, so they can afford insurance until such time as the premiums drop again?
It is not intended as a long-term solution – ideally we want, and need, a private industry that is both affordable and sustainable. However, for a relatively short-term solution, this idea has merit and should be properly investigated.
It is clear that something needs to be done, and soon, which is why I will continue to fight for equal access to property insurance for people in Northern Queensland.
When I hear how desperate people are for a solution, it angers me greatly that yet again, Wayne Swan has taken public money in this case $400 million – to prop up this Government’s worsening budget black hole, when he could have made a huge difference in the lives of many hundreds of thousands of property owners.
If John Howard could step up and support all of Australia, then this Government should be able to step in and assist us.
To add your support to the petition calling for Fair and Affordable Insurance Premiums, click here
