RACT has cautioned against “simplistic solutions to complex challenges” after the state Liberals announced plans to establish a government general insurer.

The member-owned motoring club and insurer says it is committed to finding solutions to the rising cost of cover.

“That means addressing the underlying factors driving insurance costs, including more frequent natural disasters, increasing building and construction costs, and government fees and charges,” CEO Mark Mugnaioni said today.

“Tasmanians already own an insurance company and, as a mutual with 220,000 members, RACT is not driven by profits, mainland interests or returns to shareholders.”

Mr Mugnaioni says premiums are set to cover claims, which are increasing in expense and complexity, but despite pressures over the past 12 months, RACT’s home insurance costs have increased less than those of mainland insurers.

Liberal Premier Jeremy Rockliff – who goes to the polls on July 19 after losing a no-confidence motion in state parliament – says Tasmanians are “sick of having to pay higher premiums for mainland payouts and profits”.

Under his party’s plans, the Motor Accidents Insurance Board would be expanded to establish TasInsure, and initial products could include home and contents, small business, community groups and events, and farm covers.  

Mr Mugnaioni said: “MAIB is not a magic pudding and it is not sustainable to use public money to subsidise insurance risks while failing to address the underlying issues that drive insurance costs.

“The solutions require government, experts and the broader community to work together. As Tasmania’s largest insurer, we stand ready to work with the next government to deliver solutions to these urgent challenges.”

Tasmanian Labor says Mr Rockliff’s proposal is a “thought bubble, with no real plan, and serious financial risks that haven’t been considered”.

Party leader Dean Winter said: “This also puts the proud Tasmanian insurance business RACT at risk. Were they even consulted?” 

Respected independent economist Saul Eslake told ABC Radio Hobart he was “to put it mildly, gobsmacked” at the proposal.

“I find it astonishing that the Liberal Party would think it’s appropriate to set up a government business to go into competition with privately owned firms who are perfectly capable of providing insurance,” he said.

Steadfast Taswide Insurance Brokers manager Cameron Gill says the idea caught the insurance industry off guard.

“We were quite blindsided by the announcement. It’s important to have consultation on what the model might look like and the pros and cons,” he told insuranceNEWS.com.au.

Mr Gill agrees with the Premier that there is market failure in some regional areas, but he suggests removing a 28% tax on commercial premiums is a “a better way [to tackle it] than starting up a very expensive insurance company”.