Lobby group proposes wider net for cyclone pool collections

The Australian Consumers Insurance Lobby (ACIL) says collecting premiums from across the country could deliver the cost benefits required from the Federal Government’s cyclone reinsurance pool.

ACIL says it is concerned savings flagged by the previous government won’t be delivered and has put forward four suggestions to improve savings from the scheme, which will be operated by the Australian Reinsurance Pool Corporation (ARPC).

“One way the ARPC may achieve greater savings for consumers in Northern Australia is through greater cross subsidisation,” it says.

Details previously released show the Government wants to collect $867 million a year in premiums, collected from areas with some risk, but no contributions would be made from Victoria, the ACT, SA, Tasmania and the majority of NSW.

ACIL says introducing a cost impact of about $25-35 on a $500,000 property in areas not deemed to have a cyclone risk would have a negligible impact on those consumers while improving the performance of the pool.

The group says cross subsidisation already takes place in the ARPC’s terrorism pool, and an expansion of the cyclone scheme to include other natural catastrophes could also address fairness concerns.

“We are advocating for broadening of the reinsurance pool and want it to include flood, bushfire and storm surge,” ACIL Chairman Tyrone Shandiman told insuranceNEWS.com.au. “If it was a broader reinsurance pool it would be a lot easier to cross subsidise.”

ACIL says the Government could also reduce insurance costs by subsiding the pool, such as by contributing $200 million a year out of consolidated revenue, with funds allocated to rating bands paying the highest premiums.

“ACIL does not believe this is a sustainable long-term solution but given the Federal Government have raised concerns about the savings generated by the reinsurance pool, it may be a quick fix to provide immediate relief to policy holders while they are working out how to make the reinsurance pool more fit for purpose for consumers,” it says.

Other measures to improve insurance affordability include mitigation and the removal of state and territory stamp duties and levies that are placed on premiums.