The Australian Government’s cyclone reinsurance pool has begun delivering lower premiums for some consumers in some regions facing higher risk of cyclones, the ACCC’s third insurance monitoring report has found.
However, the savings generated by the reinsurance pool have been offset to varying extents by other cost increases affecting insurance markets. These costs include the broader hardening of global reinsurance markets, extreme global weather events, and price increases of building materials and labour.
Premiums remain very high for many consumers and are generally rising nationally, and insurance affordability remains a key concern in many communities.
“We have seen that the pool has led to some savings for insurers writing policies in higher cyclone risk regions of Australia. Insurers are making changes to pass these savings on to consumers, and also to better recognise specific mitigation measures consumers have implemented,” ACCC Deputy Chair Catriona Lowe said.
“However a range of factors including a hardening of global reinsurance markets and extreme global weather events are contributing to these savings being less apparent to consumers, who continue to face very high insurance premiums.”
“Our engagement with the community has reinforced the importance of more affordable insurance premiums across northern Australia. We continue to hear consumers say that the cost of insurance for their home or small business has become prohibitive, forcing them to risk underinsurance or go without insurance at all,” Ms Lowe said.
The ACCC’s third annual insurance monitoring report comes as all large insurers have joined the pool and small insurers remain on track to meet their 31 December 2024 deadline. However, changes to premiums have not been instant.
“Different insurers entering the pool at different times as well as the time needed for insurers to implement pricing changes has meant the transition to the pool has been long and gradual,” Ms Lowe said.
“For consumers anticipating the benefits of the pool, it has been a long wait, particularly as potential savings from the reinsurance pool may not be seen until they renew their policy or take out a new one.”
Over time, the ACCC’s monitoring will provide information and data to help examine the impact of the pool on prices, costs and profits of insurance.
“Our work should allow governments to evaluate whether the pool is delivering outcomes as intended,” Ms Lowe said.
“We are optimistic that the pool can achieve some premium savings and benefits for consumers at higher risk of cyclones, but the pool, on its own, won’t solve acute affordability concerns.”
The ACCC also continues to believe that there remains significant merit in many of the recommendations we made in our Northern Australia Insurance Inquiry to improve the way insurance markets are working for consumers.
Above is a media release from the Australian Competition and Consumer Commission (19/09/2024). The remainder of the article, including background information and more detail on the findings and meanings of the ACCC report, is available here.