The industry is agog after Premier Jeremy Rockliff’s announcement last week that, if re-elected this month, Tasmania will create a government-owned general insurer.  

Questions abound, but first, it’s worth giving this some historical context.

About 35 years ago, state premier Robin Gray – also of the Liberal Party – faced issues similar to today’s. Tasmania’s budget was in the red and politicians were in a fierce battle to win over voters. 

Mr Gray pledged to sell $400 million of state assets over four years.  

The Labor Party opposed selling the Tasmanian Government Insurance Office (TGIO) and softwood plantations for short-term financial gain.

But privatising insurers and other state assets was very much in line with the early-90s zeitgeist.

Across Australia, governments rapidly sold banks, gas groups, water, rail, ports, plantations, public transport, defence, lotteries, GrainCorp, the Snowy Mountains Hydro-Electric Authority, airports, Qantas and Telstra.

The Tasmanian Liberals won the state election, and TGIO was sold in 1993 for $54 million.

Fast-forward three decades and Mr Rockliff – who goes to the polls on July 19 after a vote of no-confidence in parliament – is also making election pledges about insurance, but is singing a very different tune to his 90s counterparts.

The Liberal Party, which has held power for 11 years, is proposing going “back to the future” with a new government-owned insurer called TasInsure.

It would be established by expanding what Mr Rockliff says is the “strong balance sheet” of the Motor Accidents Insurance Board (MAIB), but not much else is clear.

“As I travel around Tassie, one of the things that keeps coming up is the cost of insurance,” Mr Rockliff says. “It feels like every time there are floods and cyclones on the mainland, Tasmanian premiums go up. We’re going to put an end to that.”

The MAIB has kept premium increases to just 5% in recent years, he says, while broader premiums in Tasmania have shot up more than 35%. This is insurance market failure, he says.  

TasInsure’s initial products could include home and contents, small business, community groups and events, and farm/regional covers.

“It will be cheaper, fairer, ours. There is no doubt the national market has failed Tasmanians. For too long, Tasmanians have been paying sky-high premiums because they are paying mainland prices to cover mainland insurance claims, or worse, they are being told they simply can’t be covered,” Mr Rockliff says.

The state’s Labor Party says TasInsure is a “thought bubble” and a “dodgy insurance deal”, and independent candidate John Macgowan says it’s a “hare-brained insurance scheme that will be a net drain”. It has also received universal pushback from private insurance experts.

The Insurance Council of Australia says if Tasmania’s Black Tuesday bushfires of 1967 happened today, they would cost $4.1 billion in insured losses.

That’s against insurance revenue in the state of about $80 million a quarter.

“Taking risk onto the public balance sheet is a bad idea, particularly when that risk is expected to grow as a result of climate change,” ICA’s Mathew Jones says.

TasInsure “poses significant risk to Tasmanian taxpayers”, he adds, urging the government to instead abolish taxes that reach 28% on commercial premiums.

The National Insurance Brokers Association says politicians should “exercise caution” around intervening in insurance, and Tasmania presents “unique challenges from an insurance risk perspective”.

“In such a concentrated market, a single severe weather event or catastrophic loss could materially undermine the viability of any risk pool,” it says.  

Member-owned motoring club RACT has warned of “simplistic solutions to complex challenges”.

Brokers contacted by insuranceNEWS.com.au have also expressed doubt the plan could achieve its goal of saving households $250 a year and small businesses 20% on premiums.  

Steadfast Taswide Insurance Brokers manager Cameron Gill is worried the scheme would lead to private insurers retreating, leaving TasInsure “the insurer of last resort with a very underpriced portfolio”.

Rosny-based Strategic Insurances Services director David Reid says Mr Rockliff is “in essence, actually right” because premiums are “bordering on astronomical”.

“But I can’t see how a state government insurance company can alleviate that. It’s bizarre, really. I just don’t see how it could get off the ground,” he says.

“They’re blaming catastrophes on mainland Australia, and it may sound good to people without insurance knowledge, but ... it’s not simple. There are employees, claims, all sorts of stuff. It could cost the government a lot of money, and it could even cost the government the MAIB.”

Insurance consultant John Trowbridge urges the Liberal Party to thoroughly model the idea with the help of experts.

“It’s questionable whether a Tasmania-only insurer can run the business better – and at a lower price for the customers – than one that’s part of a national or an interstate operation,” he says. “It can be volatile, and Tasmania is a small market.”