Government mulls ACCC intervention over insurance pricing

Stephen Jones has touted sending in the ACCC if insurers don’t respond to improvements by homeowners to better avoid catastrophic weather events.

The Albanese government has warned it may look to send in regulators if insurers don’t recognise safety and mitigation efforts made by homeowners to make properties more resistant to catastrophic weather events.

Speaking on the sidelines of the International Congress of Actuaries, Assistant Treasurer Stephen Jones said the government was concerned about the continued premium price rises hitting households, but soundly rejected suggestions of subsidising at-risk and under insured homeowners.

In an earlier speech, Mr Jones said the government said “it makes little sense to mask the price of the risk of climate change through subsidies for insurance if it encourages building the wrong buildings in the wrong places”.

“But the same orthodoxy has to be applied by insurers when they are pricing premiums for communities and households that have taken steps to mitigate risk,” he said on Monday.

“If they are lumped with the same premium as people who are not taking those steps, then that’s unfair. Not only is it unfair, but it’s also bad business and bad economics. It sends all the wrong signals.”

Mr Jones said insurers should respond to households reducing the risk on properties by making them safer and more resilient.

“They ought to tell households in advance about things they can do that will bring their premiums down,” he said.

Mr Jones told The Australian that the government would look at the “best mechanisms” for ensuring insurers recognised home improvements.

“I want to look at what the best mechanism is, I don’t say it shouldn’t be the ACCC, obviously they have a standing role in the economy for this sort of work,” he said.

“The first step is telling the insurers that it needs to be taken into consideration because as a local member, I get people making representations to me. I did all these things. I still get the same insurance bill as the blog next door.”

Listed insurer QBE has warned it is facing spiralling costs from natural catastrophe events across its international business exposures.

Storms and flooding which lashed New Zealand saw the firm reveal it would slash its combined operating ratio from 93.5 per cent to 94.5 per cent.

This came after QBE was slugged with almost $US480m ($716m) in catastrophe costs in the first quarter, tracking towards the top of the $US535m allowance intended to cover losses in the first half of the year.

Fellow listed insurers Insurance Australia Group and Suncorp have both warned of similar issues, with premiums charged to customers racing ahead in response.

QBE said in May its gross written premiums were up 11 per cent, warning it would pass through a further double-digit increase to ensure its margins didn’t slip further in the second half of the year.

Allianz Australia chief executive Richard Feledy told The Australian in April the government should look to extend its Cyclone Reinsurance Pool to cover flood losses to support insurance cover for Australians.

However, Mr Jones said the government did not support this move.

But he noted the government was pleased with the performance of the Cyclone Reinsurance Pool, which provides up to $10bn in reinsurance for Australian insurers writing cover for properties across the North of the country.