Following the 30th June announcement by the Hon Stephen Jones MP promising to release of the Cyclone Reinsurance Pool modelling, consumers are no closer to understanding the impacts the Cyclone Reinsurance Pool will have on premiums due to Treasury not releasing important aspects of the modelling.

The Federal government have released rating bands for the Cyclone Reinsurance Pool, this information is available in the Finity report released in early July (Click Here).

The rating released has 23 rating bands A to W based on suburb/post code – Treasury have released the rates but are yet to release information on what rating bands apply to which suburbs/post codes. Without this information consumers are unable to understand the reinsurance rates that apply to their property.

ACIL wrote to Treasury from 1 st July to 19th July seeking further clarification of the modelling and we have been advised Treasury are now planning to build a secure online calculator for individual addresses, that consumers will be able to access through the ARPC website. ACIL have been advised that building this calculator is likely to take approximately two months, subject to availability of staff and other resources.

“Consumers are eager to understand the impact the reinsurance pool will have on the cost of insurance. The Federal Government have information on ratings applicable to location available that can be released but are yet to release it. Releasing this information may help relieve cost of living pressures by those in Northern Australia so we wonder why little priority is given to releasing this information. We believe the immediate and timely release of this information is important to provide for greater clarity and transparency of the reinsurance pool.” ACIL Chairperson Tyrone Shandiman said.

ACIL wrote to Stephen Jones MP on 22nd July asking that Treasury release the full modelling or provide further clarification as to why the Federal Government were withholding the release of rating bands that apply to the varying suburbs. ACIL are yet to receive a response.

What does the Modelling released say so far?

The modelling released by Treasury provides the following information:

  • The Federal Government want to collect $867million per annum in premiums to fund the reinsurance pool.

  • QLD, NT, WA and a small portion of NSW (North of Port Macquarie) will contribute to the reinsurance pool. With no contributions made by VIC, ACT, SA, TAS and the majority of NSW (south of Port Macquarie).

  • The maximum standard rate for Wind risks is 0.5000 for every $100 insured. This translates to $500 for every $100,000 insured + GST + Stamp Duty & Insurers Margin (say $600-$700)

  • The maximum standard rate for Cyclone related flood risks is 0.1000 for every $100 insured. This translates to $100 for every $100,000 insured + GST + Stamp Duty & Insurers Margin (say $120-$140)

  • The maximum standard rate for Cyclone related Storm Surge risks is 0.0500 for every $100 insured. This translates to $50 for every $100,000 insured + GST + Stamp Duty & Insurers Margin (say $60-$70)

  • Loading and discounting will apply to standard rates for a range of risk factors including but not limited to sum insured, excess, wall & roof construction, age of property & number of stories.

  • The premiums shown above are in addition to the insurers standard premiums for all other perils (such as fire, accidental damage, earthquake etc).

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Australian Consumers Insurance Lobby Inc (ACIL) are concerned about reports from Assistant Treasurer Stephen Jones MP suggesting promises of premium savings associated with the Cyclone Reinsurance Pool made by the previous Government will not be met.

The new Federal Labor Government will shortly release modelling used to design the previous government’s Cyclone Reinsurance Pool and they believe savings promised are unachievable.

ACIL response to Modelling

  • ACIL are disappointed to hear this news and we believe:

  • savings advised by the previous government of up to 46% (including savings for strata properties up to a 58% and SMEs up to a 34%) are still needed to deal with the issue of affordability and availability of insurance in Northern Australia.

  • If immediate fixes cannot be applied, the implementation of the Cyclone Reinsurance Pool should continue if it generates a positive outcome for consumers.

  • a cyclone reinsurance pool is an appropriate mechanism to address affordability of insurance in Northern Australia.

  • the modelling of the Cyclone Reinsurance Pool must continue to be refined to ensure that the Cyclone Reinsurance Pool meets its purpose.

  • The legislated 3-year review of the reinsurance pool is not sufficient. A review of the reinsurance pool after 12 months must take place. This was agreed by the former Assistant Treasurer under their ministerial discretion and we will be seeking similar assurances from the new Assistant Treasurer Stephen Jones MP.

  • the new government must work with the ARPC and all stakeholders to address the affordability crisis for insurance.

“We did have some reservations about whether the modelling associated the reinsurance pool stacked up when we were advised by Treasury the final reinsurance program would not be released to insurers until after the federal election in late May. The timing seemed somewhat unusual given feedback provided by insurers suggested this did not provide insurers enough time to implement the Cyclone Reinsurance Pool to consumers at the “household level’ on the 1 July rollout. Irrespective of the actions of the past government, the new government has a role to play in getting the Cyclone Reinsurance Pool right for policy holders. ACIL are passionate about a review of the Cyclone Reinsurance Pool after 12 months. We wrote to Anthony Albanese in April seeking commitment of a 12 month review, although this was not responded to we are following this up with the new government. It is clear the Cyclone Reinsurance Program will need updates to ensure it is fit for purpose for consumers”

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Members of Northern Australia Insurance Lobby Inc (NAIL) voted to change the name of their association at their recent AGM held on 16th June 2022 to the Australian Consumers Insurance Lobby Inc (ACIL).

NAIL was originally established as a consumer representative group for the issue of affordability and availability of insurance in Northern Australia and the change in name recognises the broadening of the scope of consumer issues ACIL will now address. While Northern Australia remains a key focus of our association, we have discovered broader issues associated with insurance (including affordability & availability of insurance) ACIL will now address.

ACIL’s key priorities in the coming year will be to:

  1. Work with various stakeholders to ensure the implementation of the Cyclone Reinsurance Pool is fit for purpose for consumers. This includes dealing with any consumers issues following the release of the reinsurance pool and representing consumers on the expansion of the re-insurance pool to include marine risks from 1 July 2022;

  2. Broaden the scope of the Australian Reinsurance Pool Corporation to deal with other insurance market failures such as flood, bushfire, storm surge, leisure industry liability etc.

  3. Lobbying for the removal of government stamp duties and levies from insurance;

“Consumers are underrepresented on issues related to insurance and it is important they have a voice. Our lobbying during government consultations on the Cyclone Reinsurance Pool got material changes that will benefit consumers. Our organisation is still committed to consumers in Northern Australia but we believe more work needs to be done to address other failures in the insurance industry and we intend on lobbying to ensure consumers come first.” ACIL Chairperson Tyrone Shandiman said.

The elected committee for the coming year are:

  • Tyrone Shandiman (Chairperson)

  • Eva Rankmore (Secretary)

  • Bradley Von Xanten (Treasurer)

  • Pam Farrell (General Committee Member)

  • Dawn Romanella (General Committee Member)

ACIL are looking for additional members to join our committee. We are looking prospective committee members that can represent or be the committee representative for other insurance issues such as flood, bushfire, storm surge, leisure industry liability.