Australia’s consumer watchdog has resurrected the proposal to establish a government mutual or reinsurance pool to deal with higher-than-average premiums in disaster-prone North Queensland.
This comes despite hopes of big insurers that the idea of a government-owned cyclone mutual had been killed off after a 2016 review by a northern Australia insurance taskforce found that such an initiative would not only distort the market, but would also cost taxpayers between $2 billion and $5 billion.
In its second update report, the Australian Competition and Consumer Commission (ACCC) said it would explore both a government mutual and reinsurance pool as part of its three-year Northern Australia Insurance Inquiry, as well as flagging a possible direct taxpayer subsidy to policyholders in northern Australia “to address the acute affordability issues experienced by some consumers” in the region, The Australian Financial Review reported.
Gary Dransfield, Suncorp insurance chief executive, rejected the idea of government intervention in the insurance market, saying the proposal had already been examined several times over the past 40 years and left alone.
“We maintain that government becoming an underwriter for home and contents in the region is poor policy and unfairly burdens taxpayers who ultimately pay for risk that can be properly covered by the private sector,” Dransfield said in a submission to the ACCC inquiry. “Suncorp does not believe government intervention in the home and contents insurance market in northern Australia via a reinsurance pool, insurance mutual, or direct subsidy will deliver a sustainable reduction in premiums.”
The Insurance Council of Australia also agreed that that the mutual idea was a bad idea, while refuting allegations of price-gouging as unfounded.
“Mutuals and disaster pools have been thoroughly investigated and rejected as too costly and unlikely to address the causes of high premiums," an Insurance Council spokesman told AFR.