Established in 2022, the cyclone reinsurance pool aims to make insurance more affordable for those at higher risk of cyclones. The ACCC's latest findings indicate that while the pool has achieved some success in lowering premiums for certain policyholders, the overall impact on affordability is limited.
ACCC Commissioner Peter Crone stated, "Our analysis shows the pool is lowering premiums of policyholders who live in areas with higher cyclone risk, as it was designed to do. However, for many consumers in northern Australia, high cyclone risk may not be the key reason, or the only reason, that their insurance premium is unaffordable."
The report notes that strata premiums remain particularly high across northern Australia, especially in north Western Australia, where the average premium increased by 18% to over $18,000 per policy. Additionally, while average premiums are higher in northern regions, premiums have risen more sharply in the rest of Australia, with an 18% increase for home and contents insurance in 2023-24.
Insurers have cited factors such as building material and labour cost inflation, along with extreme weather events, as contributors to the high insurance premiums. The ACCC also observed that there is limited appetite from insurers to expand services or increase exposure in certain cyclone-prone regions, with no new insurers entering northern Australian markets following the pool's commencement.
Furthermore, the report highlights that while the reinsurance pool was intended to incentivise private risk mitigation, there are limited signs of this occurring. The ACCC found that most insurers have frameworks to recognise private mitigation, but communication about mitigation efforts is typically limited.
Improving property and community resilience to natural hazards through better mitigation is crucial for reducing risks and enhancing affordability. The ACCC's findings suggest that while the cyclone reinsurance pool has had some positive effects, more comprehensive measures are needed to address the ongoing challenges in the insurance market.
