The $10 billion-backed government cyclone reinsurance pool has begun work, but a bitter row has developed about the level of savings it will bring.
Financial Services Minister Stephen Jones said last week the previous Coalition government had “deliberately misled” people when it flagged premium reductions of up to 46% for homeowners, 58% for strata properties and 34% for SMEs.
The new government released modelling by Finity which suggests average savings to northern Australians of 15-20%.
The analysis shows average savings across the entire sample set (almost 200,000 properties across Queensland, Northern NSW, WA, and NT) as 8% for home, 14% for SME and 13% for strata. The figures increase to 19%, 17% and 15% respectively for northern Australia properties, and 38%, 28% and 18% for the worst-affected properties.
“The promise of a premium reduction of up to 58% was simply not true and they knew it,” Mr Jones said.
“The modelling predicts some communities could actually see their premiums rise.”
But Liberal MPs have hit back, arguing that the statistics the Morrison government put out were backed by Treasury officials.
“We were very clear,” MP for the north Queensland seat of Herbert, Phillip Thompson, said.
“We always said for homeowners facing the most acute cost pressures there would be savings of up to the figures used, based on the advice provided at the time.”
The Australian Consumers Insurance Lobby (ACIL) says it is disappointed that the previously mentioned savings don’t seem likely to materialise. But it says that level of savings is still needed “to deal with the issue of affordability and availability of insurance in Northern Australia”.
“Irrespective of the actions of the past government, the new government has a role to play in getting the cyclone reinsurance pool right for policyholders,” it says in a statement.
“ACIL is passionate about a review of the cyclone reinsurance pool after 12 months. It is clear [it] will need updates to ensure it is fit for purpose for consumers.”
Strata Community Association says it welcomes the release of the modelling.
“The data offers a more complete picture of the premium rate discounts that strata homes are likely to receive and fills in many of the blanks that the initial announcement left wide open,” it says.
“While it’s disappointing to see that strata homeowners will not receive the large reductions in premiums that was previously promised, the transparency in releasing the data will allow for a much more common-sense approach, and represents a firm commitment from the Federal Government to introduce the reinsurance pool successfully.”
The modelling is published on the website of the Australian Reinsurance Pool Corporation (ARPC), which will run the scheme, along with initial premium rates and the reinsurance agreement.
ARPC says further consultation on premium rates will take place until July 31, with revised rates to be published on October 1.
“ARPC will undertake industry forums from July 2022, to assist insurers and reinsurers to transition to the cyclone reinsurance pool – which is compulsory for large insurers by 31 December 2023 and for small insurers by 31 December 2024.”