In January the government released the final ACCC report on insurance in Northern Australia. This week the PM has announced on a visit to Cairns a $10 billion guarantee for a disaster reinsurance pool for Northern Australia.
In the way of things this is an announcement absent any detail which wont likely come until after an election. What it does is provide a response to the ACCC report and reject the preferred ACCC policy of direct subsidy. However it is still a subsidy.
It isn’t clear to me why the political opposition to the preferred ACCC policy was so outspoken. George Christensen on FB:
There is no silver bullet for skyrocketing insurance premiums in the North, but the closest there is to a silver bullet is a Government-backed nationwide re-insurance pool, similar to that established for terrorism insurance after 9/11.Allianz Insurance says it will reduce premiums in the North by more than half if a re-insurance pool is established.The ACCC’s report has missed the mark on this.
The Federal Government’s $10 billion cyclone reinsurance pool has been widely and publicly welcomed by the insurance industry – but not so very long ago there was almost universal opposition.
As insuranceNEWS.com.au has reported, the Australian Competition and Consumer Commission (ACCC), in its final report on insurance affordability in northern Australia, decided against recommending a pool. But in July 2019 the Insurance Council of Australia (ICA) berated the competition regulator for even considering it.
“The industry is disappointed that the ACCC is examining several flawed ideas – a government-backed reinsurance pool, mutual and direct subsidies – despite these options having been the subject of previous inquiries and found to be unviable and too expensive,” ICA said at the time.
As recently as last year, Suncorp told Insurance News magazine that “we remain unconvinced that a reinsurance pool will work”. Allianz has long argued in favor of a pool, but the ACCC, in its report released late last year, says “the majority of the insurance industry opposed the introduction of either a mutual or reinsurance pool”.
insuranceNEWS.com.au has been told that, despite the revised public position, many within the industry still don’t support it. Many believe the arguments that it won’t deal with the underlying issues, won’t substantially reduce premiums, and could mask pricing signals, are as valid today as they were a year ago.
Politicians hoping for a 50% reduction in premiums have been labelled “naïve”, with single figure reductions much more likely. There could, of course, be good reasons for the insurance industry changing its tune. The affordability issue has worsened in recent years, and political pressure has increased sharply with a Federal election looming, and some Queensland seats considered vital to the Coalition cause.
There comes a point where there’s nothing to be gained by continuing to oppose something that the Government, despite repeated recommendations to the contrary, is determined to do.