Inquiry into the affordability of insurance in Northern Australia.
I appreciate that governments have to be seen to be doing things but continually wasting money on inquiries that tell us what any sane person knows is just a waste.
Anyone watching today’s news and seeing the damage caused by the first of this season’s cyclones can appreciate that the cost of insurance reflects the increase risk in any part of Australia likely to be adversely effected by a cyclone.
This one was only a Category 1. Nine cyclones of various intensities hit Australia last year along with another 19 tropical lows that may well have intensified into tropical cyclones.
What the inquiry did recommend was something that many of us have been calling this for years and that was to remove all taxes and levees on general insurance. This would reduce the cost by around 22%. A huge difference for the insuring public.
Secondly it addressed the need for risk management including more stringent building codes. This again makes sense.
The area that I think they got terribly wrong was broker commissions. It quoted that brokers are not likely to choose the cheapest premium. This may well be the case but the reason in my experience is not that it is due to higher commissions but rather providing the insured with a broader coverage or a better claims service. Insurance should not be selected on price alone but rather, matching the coverage to the risk and risk appetite of the insured, the claims service and the financial stability of the insurer.
Brokers in FNQ and NT earn their commission, obtaining multiple quotes is difficult in this market. Ultimatley, the client chooses their insurance cover based on the broker recommendations but it is certainly not always price-based. In an area that is prone to cyclones and monsoon flooding, there are covers that are optional but with each passing season become more limited in these areas, such as flood cover. The alternative to the insurer paying the broker commission? Fee for service, paid for by the client? A further fee for claims management by the broker? The commission at present pays for all brokers services, along with a broker fee, which will have to be increased if the commission is lost. The consumer loses again!
[…] Last week I posted an article on my thoughts on the findings of the latest of a long list of inquiries into the affordability of insurance in northern Australia. See https://www.allanmanning.com/inquiry-into-the-affordability-of-insurance-in-northern-australia/ […]
Totally agree that sourcing appropriate property insurance in higher risk regions is an area where brokers really earn their money. Also the support they provide in helping manage a large claim for the insured in what is often a stressful and emotionally draining situation.
GREAT POST!
THANK YOU FOR SHARING…