Mackay and the Whitsundays homeowners are being slugged with insurance premiums twice the national average, a three-year ACCC probe has uncovered.
A report has been handed down with 38 recommendations aiming to make insurance more affordable for northern Australians.
But Dawson MP George Christensen has labelled the recommendations a “cop out” and said they failed to address the “market failure”.
A 50 per cent subsidy, one of three options suggested in the report, would save households more than $950 per year at a cost of between $68 and $90 million annually.
Mr Christensen believes a reinsurance pool, collected through a nationwide levy, would better help in offsetting insurance companies’ costs and lower premiums in the north.
The ACCC report suggests making it easier for consumers to search for and compare insurance products, abolishing stamp duty and kickbacks for brokers, introducing subsidies for low-income earners, payment deferment options, and standardising policies, among others.
ACCC deputy chairwoman Delia Rickard said the measures were “hugely needed” with more North Queenslanders becoming uninsured.
“At the public hearings, we had people in tears because for the first time in their life, they were uninsured, they couldn’t afford it,” Ms Rickard said.
“And once they let go of their insurance, there’s a good chance they won’t pick it up again.”
The inquiry found Northern Australia residents paid about $2500 annually which was 1.8 times the national average for combined home and contents insurance premiums.
The figure steeped to more than twice the average for home insurance only.
Hamilton Island residents were the hardest hit, forking out an average of $14,893 for combined coverage premiums, with Airlie Beach to Mackay residents charged about $3000.
Ms Rickard said insurers were not price gouging, noting premium increases over the past decade were a result of insurers realising they had been massively underpricing.
She explained more data was available and insurers were practising “address-level pricing” which took into account a home’s location and build.
“We know that there are real reasons for more expensive insurance premiums in Northern Australia,” Ms Rickard said.
“The risk of extreme weather is higher and it can be costly for insurers to service these regions.”
But Ms Rickard said insurance quotes could be “vastly different” with one example citing a $2700 price difference between insurers.
“While many consumers could save by switching, it is harder than it should be for consumers to shop around,” she said.
She said the ACCC’s recommendation to standardise insurance policies would make it easier for consumers to know what they were covered for including how a flooding event was defined.
But Mr Christensen said he was “bewildered” the ACCC had ruled out plans for a taxpayer-funded reinsurance pool, which would defray the risk of cyclones and floods for insurers.
Mr Christensen said “market failure” had inflated insurance premiums in the north.
“I just don’t know where the ACCC is coming from,” he said.
“For me, the blindingly obvious solution is a reinsurance pool.
“It has worked elsewhere, it has worked in other fields of insurance that have failed in Australia.”
Mr Christensen said North Queenslanders, via levies on builders, were already contributing to a reinsurance pool covering the risk of terrorism events most likely to occur in capital cities.
He questioned why larger populations elsewhere in Australia could not help offset the costs of weather events in the north.
“Originally, that’s how insurance ran … over the years, it has changed to this really-lopsided situation,” Mr Christensen said.
“We really are hampered by the fact that there’s not enough people up here to offset the costs.
“If you’re not going to alleviate that situation, you’ll never develop North Queensland to a greater extent.
“I have spoken with a major insurance company in Australia that have told me that if there was a reinsurance pool established that would offset the cost of cyclones … then they would re-enter the market at about half the average premium price that exists at the moment.”
Mr Christensen also said the ACCC’s subsidy recommendation was not “fleshed out enough”.
The subsidies, drafted at 10, 25 and 50 per cent, would work in a similar manner to child subsidy schemes whereby lower-income consumers would purchase insurance before receiving a government rebate.
At 25 per cent, the subsidy would save households more than $600 per year at a cost of between $16.8 and $21.6 million annually.
“Just applying it to low-income earners really cuts out a great bulk of middle-income families that are actually also hurting because of high insurance premiums,” Mr Christensen said.
Source: Whitsunday Times