Tuesday, 20 June 2023
Northern Australia Joint Select Committee; Report
I have been looking forward to rising to speak again on this very, very important subject of cyclone reinsurance. As the member for Leichhardt and the Deputy Chair of the Joint Standing Committee on Northern Australia, I've taken a very keen interest in this issue over many, many years and in finding a solution for insurance affordability in Far North Queensland, and in northern Australia more broadly, and it's been very challenging. We've been up a lot of dry gullies as we've tried to find solutions.
I also would like to thank my very, very capable chair of the committee, the member for Lingiari. She is very, very capable and a great replacement for her predecessor, and I enjoy immensely working with her. I can't stress enough the level of cooperation that we have in working in a very bipartisan way. This in itself will allow us to achieve the best possible outcome that we can for our region. Other members of the committee—I see my good friend the member for Dawson here, ready to make a contribution, which I'm sure will be very positive, and other members, as well—have made a great contribution. I also would like to acknowledge the work of the secretariat. Patrick, Ros and Jason are doing a brilliant job. They make it a lot easier for us as members of the committee, and I really appreciate the outstanding work that they've done.
During my previous address, when this report was first tabled, I spoke to the key recommendation that I believed would help drive the required reforms that will ultimately see insurance premiums come to a more affordable level. We're certainly not there yet, but we have to see it as a work in progress. There have been many important learnings going through this journey, and I believe we are getting a little closer now. I believe that I see a little bit of light at the end of the tunnel.
Since the inquiry, we've seen a number of insurers make good on their commitment and join the reinsurance pool. We now have Sure Insurance and Allianz. Allianz is only partly there; it's only their general insurance. We've still got to get their strata and business insurance to come on board as well. I understand that will come later in the year. CHU was the latest one to confirm that they're part of the scheme. I was talking only today to the AAI group, and I know the member for Solomon also met with them today. I was pleased to see that they're very close to coming on board as well. This is the Suncorp group and the range of companies that are under that umbrella.
As I said during my previous speech on this matter, the full impact of cost reductions will only really be ascertained once all of these companies are operating and have signed into the pool. I didn't realise at the time when we first brought this in that it was going to take a lot longer than I anticipated because they had contractual arrangements with international reinsurers, and it's only as those international reinsurers become due for renewal that they're able to step away from that and join this pool. But by the end of this year we will have all of them on board, and that's really going to make a very significant difference.
Already we've seen premiums start to soften and a broader positive impact on many of the affected communities, which have certainly long suffered from the absolutely ridiculous costs to insure the properties. I'm sure all members will appreciate that it's now more important than ever that we really focus on getting these reductions, given the ever-growing cost-of-living crisis. I firmly believe that we can deliver savings to the affected consumers if we take meaningful action.
This is particularly important with respect to strata, where we have to be also looking at encouraging the state government to look at reforms, in two areas in particular. One is the cost of stamp duties on renewals, and the second is the current policy which requires body corporates to insure for full replacement value. That, unfortunately, significantly increases the cost to the insured. We need to get to a point where they have an option of either full replacement, if they're super cautious, or insurance for the market value of the property, which is generally much, much less than full replacement value. The reality of the situation is that no insurance company, if they're going to write off an asset, are going to pay any more to the insured than the market value of the property. So that's something that we need to continue to focus on.
Again, I reiterate the importance of some of the key recommendations from the report. Some of those were mentioned earlier by the member for Lingiari, who is our chair. One crucial aspect is the 40-hour limitation associated with cyclone related floods. Aligning with the international standard of 168 hours would offer more realistic coverage, but we must be careful to balance this with the potential of increased costs. Again, I retain significant concerns about insurance for farms and agribusinesses and marine insurance, and I'm not certain that these areas have yet been sufficiently addressed, so we need to be keeping a close eye on that.
As the chair mentioned, the timely release of modelling data to insurers also remains an essential element to enable accurate decision-making in this whole process. My hope is that we will continue to work collaboratively across all jurisdictions to get the reinsurance pool to be as perfect as it can be, with the aim of using it as a model for other areas that have challenges more broadly in Australia. We've seen over recent years that much of Australia has been impacted by floods, and, if the reinsurance pool can be perfected in this case, as we're doing in northern Australia, I'm sure we can expand it to take these learnings to develop a similar solution for these other areas as well.
One of the keys now is that we've got to wait until the end of the year when everybody is on board. That's going to significantly increase competition, and we'll see the real impacts of the changes in relation to costs et cetera as we wait for more insurers to join the pool. Once we've got all of these companies—large and small—in there, by the end of the year, we can start doing another assessment. As the chair also said, I think we need to be looking at this early in the new year. Let's have a look at the effects of the changes that we have now, and then I would be encouraging the committee to have another sharp, deep dive into this and have another go at it to see where we need to tweak it even further so that we can get it to be the absolute best it can be.
I'm very keen to continue to work with the chair and the committee in a very strong bipartisan way to make sure that, at the end of the day, we can be proud of what we've been able to achieve. At the end of the day, I think all of our communities across northern Australia can be very, very thankful for the work that we're doing in this place.
I certainly commend the recommendations and the report to the House.