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10 March 2014
The parliamentary committee investigating strata insurance in Far North Queensland has called for a state government moratorium on stamp duty in 2012/13.
The House of Representatives committee has called on the Federal Government to work with the Queensland Government to impose a 12-month freeze on stamp duty on strata premiums north of the Tropic of Capricorn.
It recommends the moratorium be extended as long as premiums continue to rise at a higher rate than the average for general insurance.
The Insurance Council of Australia (ICA) has welcomed the recommendation but says it should apply across all of Queensland and should be the first step in abolishing all stamp duties and levies across the country.
The taxes are inefficient and inequitable, and are a significant contributor to the affordability of insurance across Australia, ICA said last week after strata insurers met to consider the report.
The other eight recommendations from the inquiry include a call for the Australian Prudential Regulatory Authority (APRA) to investigate insurers’ risk assessment methodologies and lack of competition for strata insurance in Far North Queensland.
Social Policy and Legal Affairs Committee Chairman Graham Perrett says the inquiry received reports of premium increases of 900%, and due to the urgency of the issue the committee wants the Federal Government to outline reforms it will undertake by December 1.
“I have been involved in a lot of inquiries and this one was the most distressing,” Mr Perrett told insuranceNEWS.com.au. “People were in dire circumstances. It was heart-breaking to see it.”
The inquiry heard that strata premiums had dropped when insurers chased market share, and Mr Perrett says more insurers are likely to enter the market now rates have increased.
The report – In the Wake of Disasters: Volume Two: The affordability of residential strata title insurance – recommends the Australian Competition and Consumer Commission (ACCC) investigate whether there is evidence of improper or anti-competitive behaviour in the negotiation of strata insurance via managers and brokers, and take appropriate action if required. (see other story)
It also recommends the ACCC review cost drivers, relative profitability and competition in the strata industry, with a focus on north Queensland.
The Federal Government will be asked to consider the feasibility of requiring insurers that provide mandated insurance such as strata cover “to offer this type of cover to all regions of Australia as part of their permit to operate in Australia”.
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