The fact that premium increases of several hundred per cent over the past few years in residential strata title insurance in North Queensland has received a lot of interest by both the press and government. Prof. Allan Manning has written or hosted several articles on this topic. See here as an example.
Back on 28 June 2012 the Government asked the Australian Government Actuary to investigate the causes of the premium increases and to report by 30 September 2012. This was in response to a report by the Standing Committee on Social Policy and Legal Affairs presented in March 2011. I found this report as I am doing some research to provide a submission to the Federal Governments discussion paper on the subject.
The Australian Government's Actuary examined whether some or all of four possible factors (identified in the Committee's report) were likely to have contributed to the large premium increases. The factors considered were:
- historical under-pricing;
- the cost of reinsurance;
- recent losses caused by natural disasters and the associated accumulation of risk in NQ; and
- decreasing competition, leading to price gouging.
The findings of the Government Actuary were that he have found that" the first three items are inter-related and that a convergence of events has led to the premium outcomes that have been observed."
Importantly he found no evidence to suggest that insurers have been price gouging.
For his part, Manning would like to see government assist with the problem and reduce State Government Stamp Duty and the Federal Government Terrorism Levy which have gone up significantly piggy backing on the premium increases. This is a quick fix that could immediately reduce the price by over 10% if they were serious about helping those effected.
As the report may assist insurance brokers and understand and explain the increases we attach a link to the report.