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Insurance Business | 31 Mar 2015, 08:35 AM Agree 0
A government-sponsored taskforce into insurance issues in North Queensland has received the backing of leading insurers and industry bodies.
  • Scott | 31 Mar 2015, 10:22 AM Agree 0
    Why is a high premium a market failure?

    A market failure is unable to provide the right cover, and to not charge the right premium for the risk involved.

    High-risk areas, such as buildings in flood plains, or occupations with high dangers (eg: dynamite factory) are going to have a high risk, and therefore a high premium.

    In this case, living at the coast in a cyclone is a high risk, so naturally, incurs a high premium. Does this suck for the owners? Yes indeed. Is it a market failure? No.

    Unless they bring something like SGIO up (now Suncorp) whose goal is to run at a loss but provide cheap, OK cover I can't see any alternative but to charge the right premium for the risk involved.
  • The Northern Oracle | 31 Mar 2015, 10:35 AM Agree 0
    Of course the big players would support the initiative because they already know the end result. The so-called Mutual (or the Fed Govt. model)will not be able to compete with existing RI arrangements without a substantial government subsidy.
  • Jeffrey McNally | 10 Apr 2015, 12:12 PM Agree 0
    A Mutual is not the way forward here , as commented above the Larger Players already have the most competitive RI arrangements in place,a better alternative would be using a model similar to the Terrorism Pool whereby all Insurers pay into ,Cat losses above a certain point. Also the Qld State Government could redirect Insurance Stamp Duty earned in the region to support the Cat Pool. Whatever the outcome there will need to be some Government support either directly or indirectly.
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