Federal government refuses to reveal reinsurance pool average savings for homeowners
Federal government refuses to provide reinsurance pool savings modelling as the legislation passes the first parliamentary hurdle.
Townsville
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THE federal government’s $10bn reinsurance pool has passed the Lower House despite questions remaining about how it will reach significant premium savings, with the government refusing to answer questions on the issue.
Last week Assistant Treasurer Michael Sukkar announced the pool, which is designed to bring down insurance premiums in Northern Australia.
He said homeowners in Northern Australia were expected to benefit from up to 46 per cent premium discounts, 58 per cent for strata properties and 34 per cent for small to medium enterprises.
While the Senate is still yet to consider the legislation, questions have been raised in Senate Estimates hearings about how these savings will be achieved.
In the Senate Economics Legislation Committee, Labor Senator Murray Watt asked for more detail on how the government had arrived at those savings.
Treasury Deputy Secretary Meghan Quinn said consultants were used to help determine what the savings on the pool would be.
However, the modelling was not tabled in the Senate Estimates hearings with MP Jane Hume saying the government would make a public interest immunity claim, with the report the subject of cabinet deliberations.
“The government believes it is not in the public interest to disclose information about cabinet’s deliberations as it may impact the government’s ability to receive confidential information and make appropriate decisions impacting the Australian community,” Ms Hume said.
She said parts of the modelling was provided to the government on the basis that it would be kept confidential.
Ms Hume did confirm that it was only homeowners with the most acute cost pressures that would receive premium discounts of up to 46 per cent.
Ms Quinn said the savings people would experience depended on the risk associated with their property and what their insurance covered.
Senator Watt and Opposition financial services spokesman Matt Thistlethwaite said in a statement North Queenslanders should be trusted with the proof of how the money would be saved.
“North Queenslanders have been waiting years to see action on skyrocketing insurance premiums,” they said.
“They deserve to see the proof that premiums will be reduced.”
Reinsurance pool passes though parliament
HERBERT MP Phillip Thompson has said people need insurance for their homes like they need water to survive.
He said the “market failure” of the essential service would be addressed by the federal government reinsurance pool, which passed the House of Representatives on Thursday afternoon.
“(Insurance) is something that you must have,” Mr Thompson said.
“But in places like Townsville or North Queensland, we haven’t been able to get insurance or the premiums have skyrocketed so much that people are choosing to sacrifice something else to get it, or forgo it all together.”
Mr Thompson said the legislation would make a “real difference” for people in North Queensland.
Kennedy MP Bob Katter also spoke on the reinsurance pool passing, paying tribute to the people who had spent years fighting for action on premiums.
“We thank the government for taking the sensible approach to reducing North Queensland’s insurance prices and for making changes to the Bill based on the feedback of locals,” Mr Katter said.
“Now the insurance companies know that there is a reinsurance pool they can proceed to give us the insurance at a reasonable rate equivalent to the rest of Australia. We thank the government very seriously for taking this initiative.”
$40m strata program still in design
A LITTLE-talked-about strata resilience program is still in the works despite being announced in conjunction with the reinsurance pool.
In May last year the federal government announced the $40m North Queensland Strata Title Resilience Pilot Program (NQSTRPP), and said it would subsidise the cost of cyclone risk mitigation works to improve insurance affordability and access for strata title properties in the region.
When it was announced, Assistant Treasurer Michael Sukkar said it would be a three-year pilot program to help address the high cost of strata insurance in the region
While the federal government has released the legislation for the reinsurance pool, which it says will give strata properties with 50 per cent or more floor space dedicated to residential a 58 per cent saving on premiums, money has still not been released for the strata program.
However, the government has been unable to explain how these savings will be reached.
The state and federal governments are working on NQSTRPP, but there is no clear indication of when it will be operational.
A spokesman for the National Recovery and Resilience Agency said the program, which would be led by the NRRA, would be delivered in partnership with the Queensland government but it was still in the design phase.
“The NRRA has held a number of discussions with the Queensland government regarding the program,” the spokesman said.
He said the federal government would fund the program, which would be administered by the state.
“The NRRA is consulting with the insurance and strata industries, key stakeholders and the Queensland government to design a pilot program that will effectively test the impact of cyclone mitigation works on strata properties’ insurance premium,” the spokesman said.
The state government’s Department of Energy and Public Works, which will administer the program, has said the government had committed $40m towards the program, which made up 50 per cent of the NQSTRPP.
“At this stage, discussions are still under way between the two governments over the implementation of the program and no funding has yet been received,” a spokesman said.
How much the reinsurance pool will save you
QUESTIONS have been raised over exactly how the federal government’s reinsurance pool will spark huge premium discounts on homes, strata and small business in Northern Australia.
Earlier this week Assistant Treasurer Michael Sukkar revealed the federal government’s reinsurance pool would trigger premium savings of up to 46 for homes, 58 per cent for strata properties and 34 per cent for small and medium enterprises.
It is not clear exactly how this will be split between the more than 880,000 policy holders in Northern Australia
The government revealed the reinsurance pool is supposed to reduce premiums for households and businesses by $2.9bn over 10 years.
When the pool was first announced, it promised to reduce premiums by $1.5bn over 10 years, with an estimated average saving of 10 per cent.
Based on the government’s figures, policyholders would save about $3295 over the 10 year period, which works out to be about $330 annually on average if split equally.
However, RACQ chief executive officer David Carter said insurers needed more information, because there was little detail how the pricing would work.
The federal government’s legislation says the Australian Reinsurance Pool Corporation, which will manage the pool, will set premium amounts that insurers will be required to pay under cyclone reinsurance contracts.
With aims for the reinsurance pool to be cost neutral, the ARPC will price cyclone and related flood damage risks to meet this objective.
The club is still examining the legislation, which was tabled in parliament on Tuesday, but says there were few changes made from the original draft legislation.
Mr Carter said RACQ was still calling for the pool to be accompanied by a long-term commitment to improving resilience and disaster mitigation.
“This will both support the viability of the pool and reduce the impact on people and communities from natural disasters,” he said.
Mr Carter said the insurance company still had questions about the reinsurance pool, which were raised in a submission to Treasury before Christmas.
RACQ put forward 15 recommendations to the federal government around cost and pricing, coverage and claims management.
“The biggest uncertainty relates to pricing in order to validate the expected premium reductions that have been reported this week,” Mr Carter said.
“Until we have that information, we are unable to comment on the figures and reductions being quoted and we look forward to continuing to work with the government and Treasury to ensure benefits to homeowners can be realised.
“As a member-owned club we will pass any actual savings on to our policyholders and therefore welcome involvement of the Australian Competition and Consumer Commission.”
Originally published as Federal government refuses to reveal reinsurance pool average savings for homeowners
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