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All quiet on the northern front… for now

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It’s hard to imagine less fanfare for a government initiative.

The north Queensland home insurance (NQHI) comparison website went live on March 31, but there wasn’t a lot of life surrounding the event.

The Abbott Government announced its intention to establish the site in last year’s May budget, with the promise it would create enough competition to drive down sky-high insurance costs.

It was right about one thing: insurance is expensive in north Queensland. In fact, prices are five times higher than in Sydney and Melbourne for strata insurance and 2.5 times higher for home insurance. The biggest driver of these higher prices is cyclone risk.

It’s not clear if the Government really believed the comparison site would drive down prices.

It should have had doubts, especially if it was taking notice of what the insurance industry said publicly and behind closed doors: there are sound economic reasons why premiums are so high in cyclone-prone northern Queensland.

High premiums reflect the vulnerability of properties in the volatile north; a comparison website would, at the very best, only make a difference on the margins.

But then, perhaps the site was meant to make more political sense than economic sense.

Given that not a great deal survived the contentious May budget, the NQHI site was always going to be an easy get for the Government.

It will certainly appeal to consumers convinced that greedy insurers are exploiting vulnerable property-owners – a view popularised by federal Liberal MP Warren Entsch, a bitter critic of the insurance industry and a proponent of the comparison site.

Mr Entsch, whose electorate covers the northern tip of Queensland, says the site will be “an important tool in increasing transparency in the market”.

That’s tosh, of course. About all the comparator will reveal is how lacklustre the industry’s response to the site has been.

Mr Entsch concedes consumers will still have to shop around. “It’s important people realise this is a tool to help with shopping around, and that they will still need to contact insurers for actual quotes specific to their circumstances and to purchase a policy,” he said.

“In most cases the final price will be different, depending on a property’s individual characteristics, and in some cases – given we know the insurance companies don’t want to insure properties in some of the more remote and coastal areas – people might still not be able to access any cover.”

As Mr Entsch concludes, this will be “disappointing” for consumers who may expect more. In fact, it’s hardly a great endorsement for what is a very expensive exercise.

Whatever the underwhelming website does increase, it won’t be pulse rates. It’s hard to imagine a more mundane and uninviting site. It’s unlikely to win any design or functionality awards.

This may reflect suspicions that the Australian Securities and Investments Commission (ASIC), which was charged with bringing the Government’s vision into the light, was a less than enthusiastic father of the bride.

ASIC put out a perfunctory – and brief – statement to mark the launch.

“The north Queensland home insurance website was launched today to assist north Queensland consumers in their home insurance search,” it opened with admirable simplicity. 

The second paragraph is almost unseemly in pointing out that “the website has been prepared on behalf of the Government”. (That is, don’t blame us.)

The site has information on policies from ANZ (including OnePath), CommInsure, IAG (NRMA Insurance), QBE, RACQ, Suncorp (including AAMI and Apia) and Westpac. Youi will join the site in May.

Are these founding members brimming with pride? Not exactly. A reasonably thorough search shows not one of them marked the occasion with a media release.

Even more astonishing, the responsible federal minister, Assistant Treasurer Josh Frydenberg, felt no need to usher in his new charge with a glowing statement.

As for the website, it provides comparison information on home and contents policy features and indicative premiums for 195 locations north of Rockhampton.

The site warns consumers they should choose policy features appropriate to their circumstances, and not just look for price – even if everyone knows that’s exactly how most consumers will use the site.

National Insurance Brokers Association CEO Dallas Booth is concerned consumers will make decisions based on price alone and assume all cover is the same. He is critical of the site for not placing greater emphasis on the importance of professional advice on insurance matters.

But in the end, it is what it is. Mr Booth can only shrug his shoulders and declare: “An insurance [comparison] site can only go so far, and this website only does go so far.”

The problem with this token approach to the genuine problem of high premiums in north Queensland is the real issues don’t get the attention they deserve.

Perhaps some of the hard issues that need to be confronted will come from the Federal Government’s Northern Australia Insurance Premiums Taskforce, announced on March 30, which also falls under Mr Frydenberg’s purview.

Even so, it may be causing the industry some concern that since the Assistant Treasurer announced the creation of the taskforce, no further announcements have been made. From what has been announced, remarkably little is known about the taskforce.

We know it will be headed by a senior Treasury official “supported by staff from the private sector and relevant government departments”. The taskforce will be supported by a “reference panel of industry experts, including in the areas of insurance and reinsurance”.

According to the minister’s media release, the taskforce will undertake “extensive consultation with the insurance industry and other stakeholders”.

Curiously, none of the major insurance industry bodies have been contacted by the Government regarding the timing or structure of the taskforce or its supporting panel.

Beyond an internal “setting-up” meeting held within Treasury, it does not seem that a lot of work has been done towards making the taskforce happen, which prompts the question: why was the Government in such a hurry to announce it? Was it to give the impression of feverish policy activity by the reborn and rebooted Abbott Government?

The taskforce, when it is established “as soon as possible”, will operate for six months. It will provide an interim report after three months, then a final report with recommendations.

It will “explore options for reducing home, contents and strata insurance premiums in northern Australia”.

The Government stresses all options – including those raised during the consultation process – will be considered.

However, the taskforce will be examining two specific options: the creation of a government-backed reinsurance pool and the creation of a community-owned mutual insurer specifically for cyclone damage claims.

They shouldn’t expect any enthusiasm from the industry on either proposal. But Mr Entsch is ecstatic. He describes the Government’s announcement as “a light at the end of a very long tunnel”.

“It’s been a long journey,” he said. “The previous government refused to do anything about this issue for a long time, and the insurance industry – including the Insurance Council of Australia (ICA) – refused to even acknowledge there was a problem.”

ICA isn’t taking it personally. Whatever the political reasons behind the taskforce, CEO Rob Whelan says ICA will work with it to “contribute expertise and insights into shaping policies that [will] benefit cyclone-prone communities”.

“The taskforce will enable the insurance industry to fully explore the options and implications of government decisions in a rational, fact-driven environment with other stakeholders,” Mr Whelan says.

In other words, it’s an ideal opportunity for the industry to point out once again that all the options so far raised by the Government are band-aids without much sticking power.

“ICA and its members will seek to focus on disaster mitigation and improving community resilience as the best ways to reduce premiums in cyclone-affected regions,” Mr Whelan says.

“However, the best long-term and sustainable way to reduce insurance premiums is to reduce the damage that extreme weather causes. Improving the resilience of homes and businesses in cyclone-prone regions has a direct impact on insurance.”

Let the games begin.