NAIL holds discussion following industry's reaction to draft legislation

The Northern Australia Insurance Lobby (NAIL) hosted what it described as a constructive discussion with MPs following the insurance industry’s reaction to the draft legislation on the cyclone reinsurance pool.

The reinsurance pool aims to help households and small businesses in cyclone‑prone areas access and afford insurance. The draft proposes that a review take place three years after the legislation is passed because the latest date insurers must prescribe to the reinsurance pool is December 2024.

On December 04, the government released the draft legislation on the reinsurance pool for cyclones and related flood damage. However, the draft was considered unsatisfying by some in the industry and even received a “resounding thumbs down” in a recent treasury roundtable discussion attended by NAIL.

Recently, NAIL met with Warren Entsch MP, George Christiansen MP, and representatives for Senator Susan McDonald about the draft legislation, claiming that it will:

• Not provide sufficient savings to consumers;
• Disadvantage those in aged or other care;
• Negatively impact tourism;
• Fail to address significant shortfalls in strata (buildings with accommodation and commercial use); and
• Be limiting to commercial use buildings.

Read more: Draft legislation for cyclone reinsurance pool given a "resounding thumbs down"

NAIL has been working actively with the government to ensure that the legislation is right for consumers. Considering the draft and its recent discussions, it offered the following recommendations:

1. Buildings primarily used for accommodation purposes (including those in strata) should not be considered “commercial use.”
2. Commercial and mixed-use strata buildings should have the same eligibility criteria as other commercial buildings (i.e., currently a limit for $5 million).
3. The sum insured limit for commercial use buildings should be higher than $5 million (ideally unlimited, but failing that $20 million).
4. The reinsurance pool should cover mixed-use strata buildings where residential use exceeds 50% (up from 20%).
5. Provide more clarity from ARPC on pricing and premium model.
6. More savings mechanisms are required to ensure the most in need consumers are at worst saving 50% or at best close to parity with consumers in other parts of Australia, which may include a nominal reinsurance charge to eligible policies that have low or no cyclone risk.
7. A review after 12 months limited in scope to consider eligibility and the actual savings.

“In our discussions, we felt the politicians in attendance stood on the side of consumers and took the time to understand the concerns we raised. It was nice to get a sense that we had a sympathetic ear of the politicians in attendance and get [an] agreement that they would take up our cause. We are hopeful we can get legislation passed that is fit for purpose for consumers when it is passed early next year,” said NAIL chairperson Tyrone Shandiman.