The Abbott government will consider offering financial support to reduce insurance premiums in cyclone-prone regions of northern Australia.
The government has put several options on the table, including a government-backed reinsurance pool or a mutual insurer that provides cyclone-specific cover.
Such a scheme would probably involve the Australian Reinsurance Pool Corporation (ARPC), an authority set up by the Howard government in 2003 to protect against claims of terrorism losses.
In the existing scheme, insurance companies pay premiums to the ARPC to reinsure the risk of commercial property damage from terrorism, and the authority reimburses losses above a certain threshold.
The assistant treasurer, Josh Frydenberg, announced on Monday that the government would ask a new taskforce to examine ways to address insurance premiums in northern parts of the country.
“Insurance costs in north Queensland are five times higher than in Sydney and Melbourne for strata insurance, and two-and-a-half times higher for home insurance,” he said.
“The biggest driver of these higher prices is cyclone risk. Similar issues exist in other cyclone-prone regions of northern Australia.”
The taskforce, to be headed by a senior government official, would consult the insurance industry and other stakeholders before presenting a final report in six months.
“The taskforce will examine whether the government could provide support to a reinsurance pool or a mutual insurer that provides cyclone-specific cover,” Frydenberg said.
“The taskforce would also assess the merits of other policy options that currently exist or are put forward by stakeholders during consultation.”
The chief executive of the Insurance Council of Australia, Rob Whelan, welcomed the taskforce, but called for a focus on disaster mitigation and improving community resilience.
“The best long-term and sustainable way to reduce insurance premiums is to reduce the damage that extreme weather causes,” Whelan said. “Improving the resilience of homes and businesses in cyclone-prone regions has a direct impact on insurance.”
Frydenberg said the government would launch a comparison website for home and contents insurance this week.
“Improving affordability will address concerns around under-insurance, ease cost-of-living pressures for families and support the economic development of northern Australia,” he said.
The members of the taskforce are yet to be named.
