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19 January 2017
National Insurance Brokers Association (NIBA) CEO Dallas Booth has admitted the northern Australian strata insurance market is close to “market failure”.
Mr Booth was speaking at a House of Representative committee hearing on strata insurance on Thursday when Leichhardt MP Warren Entsch asked him if there was a regional market failure.
“In northern Queensland, there is a difficult market with limited supply,” Mr Booth told the committee.
“A national market failure is when you don’t have any supply.”
Mr Entsch asked what happens when brokers in northern Queensland cannot obtain any quotes for their clients.
“We now have one insurer, who people cannot afford. Isn’t that regional market failure?” he asked.
Mr Booth admitted strata insurance has become a real issue in northern Queensland.
“I can’t deny it is getting very close to market failure,” he said. “At the end of the day some properties are uninsurable.
“The problem is insurance works well with the things [that] might happen. When things are guaranteed, insurance doesn’t work very well because you can’t spread the risk.”
Mr Booth says insurers are only part of the solution to protecting against risk, and that all the other factors, such as building codes and flood-mapping, have to be put in place as well.
Mr Entsch said the main issue in northern Australia is cyclones, and building codes to strengthen properties have been in place since the 1980s.
“The Insurance Council of Australia (ICA) has a report that shows catastrophes have decreased,” he said.
“We have had one major event in Darwin and no more [there] since then, two in Queensland and all the damage was done to pre-1987 properties.”
Mr Entsch says the damage from cyclones to newer buildings has been much less, but insurers have nevertheless increased their prices dramatically.
He said other areas of Australia that have been damaged by cyclonic winds, such as Melbourne and Sydney, haven’t had the same price increases imposed.
Mr Booth said the cost of reinsurance is spread across all of Australia and not just one region.
He said NIBA does not have access to insurers’ pricing engines to see how they come up with increases for some regions.
WA MP Pearce MP Judi Moylan questioned Mr Booth on clients not being able to contact their brokers after a major disaster.
“I wonder what frustration people with claims face because their broker doesn’t have a 24-hour hotline,” she said. “Has NIBA considered when a major event occurs having an emergency number?”
Mr Booth said the association hasn’t investigated the idea, but ICA does provide a service for insurers.
“A major disaster puts a massive strain on the [insurance] system, but what we do know is brokers have worked hard for their clients,” he said.
18 January 2017
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16 January 2017
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16 January 2017
Support the AsiaPac Treasury team in rolling out treasury disciplines across the region including cash management and FX optimisation, and reporting of same.