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ACCC recommends immediate overhaul of insurance in northern Australia as costs soar

Susan Standen and Sofie Wainwright, Wednesday December 19, 2018 - 14:31 EDT
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In high risk areas, consumers are paying $4,000 or more for home and contents insurance. - ABC licensed

The Australian Competition and Consumer Commission (ACCC) says government intervention is needed to bring down high insurance prices in Northern Australia, recommending the abolition of stamp duty on home, contents and strata insurance products.



The competition regulator said insurance premiums were higher in areas that faced the threat of major weather events, such as cyclones.

The ACCC said in high risk areas of the Pilbara and coastal north Queensland, consumers paid $4,000 or more for home and contents insurance — the highest average premiums in the country.

It made 15 recommendations in its interim report for the , which included either abolishing or "re-basing" stamp duty on insurance products in high-risk areas north of the Tropic of Capricorn.



Call for transparency

Deputy chair Delia Rickard said it would level the playing field for consumers.

"In real terms, the stamp duty revenue collected from home, contents and strata insurance in northern Australia has increased from $22 million per year in 2007–08 to $79 million in 2017–18," Ms Rickard said.

"GST revenue has increased from $25 million to $78 million over the same period."

The ACCC also said definitions needed to be clearer to consumers so they could understand and compare policies more easily.



Ms Rickard said the ACCC was working with the Australian Securities and Investments Commission (ASIC) to make it easier for insurers to talk to consumers about rebuild costs, and what they could and could not say, which was presently defined as financial advice, and could not be discussed.

Another recommendation was for insurers to provide greater transparency, requiring them to report to ASIC on postcodes and brands where they were writing new business.

Insurers were not currently pooling addresses to equalise out prices across a region and, instead, individual addresses were used, leading to exorbitantly high premiums at a local level.

Ms Rickard said some people were being quoted up to $10,000 for home and contents insurance.



ICA agrees industry can better inform consumers

Spokesperson for the Insurance Council of Australia (ICA) Campbell Fuller said there needed to be a concerted national approach to getting rid of stamp duty on insurance as it was counter-productive, leaving people choosing to be under-insured or uninsured.

Mr Fuller said claims were becoming larger and more frequent.

He said business was challenging for insurers in northern Australia.

The ACCC has found that some insurers were operating at a loss with most only marginally profitable, but found they often made 'premium adjustments' to reflect their broader objectives, not directly linked to the risk of a property.

This will be explored as the inquiry continues into 2019, which will also look further at affordability issues and propose policy changes to achieve real and meaningful change for northern Australian communities.

Another key focus area for investigation in 2019 will look at Indigenous communities and how to make insurance products more accessible to low-income households.

Queensland strata properties targeted



The ACCC said strata claims in northern Australia were on average three times larger than those made in the rest of Australia.

Strata property owners accused managers of having no incentive to negotiate the best premium due to conflicted remuneration arrangements where they received a share of insurance brokers' commissions, which were based on a percentage of the premium.

Hence the recommendation that insurance commissions be banned.

Kevin O'Donnell, who is the chairman of two body corporates and an apartment owner in Townsville, said body corporate fees for apartment owners were increasing because the cost of insurance was increasing, making it unattractive for people to buy and sell apartments.

"It's affecting our pocket because we're paying more in premiums," Mr O'Donnell said.

"It's also making it harder for the people here to sell their units.


"It just goes to show that we're not getting a fair deal from the insurance companies."

He said his insurance had gone up 20 per cent for no reason in the past 12 months.



Mr O'Donnell said he would be lucky to get two responses from insurance companies when tendering for strata title insurance.

John Lally recently retired to Perth after living in the small port town of Dampier for 30 years and said his insurance was much cheaper than when he lived further north.

After three decades of living in the high-cyclone rated area, he said the biggest issue was that insurance premiums did not reflect the higher building standards of the area.

"The houses are all built to Category D for high cyclone risk, so that when a cyclone hits, there is very little damage, unlike the homes in northern Queensland, which are generally much older and not built to cyclone standards."

"Dampier and Karratha have storms but there is very little damage to homes from cyclones.

Broome businesses suffering

Broome business owner Gaye Wotherspoon said her insurance costs rose every year.

"If we have a particularly cyclonic season and there's a lot of claims — even if you've never made any claims for 30 years — your premiums will still go up," Ms Wotherspoon said.

"I think that's something that insurance companies could look at too, giving some sort of a loyalty program for no claims.

"I can actually see, although I'd never be game enough to do it, why people pull out of insurance, because you're paying year after year and you don't make any claims, it's really costing you a whole lot of money for nothing."

Ms Wotherspoon, who runs hair salons and a music shop, said everyone suffered when business insurance costs rose, as these were passed on to consumers.

"It's extremely hard to get a house insurance policy because a lot of insurance companies will not insure up north," she said.

"I think it's really unfair; I think we are being penalised in a lot of ways."


- ABC

© ABC 2018

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