The Australian Government's cyclone reinsurance pool has begun delivering lower premiums for some consumers in some regions facing higher risk of cyclones, according to a report released yesterday by the Australian Competition and Consumer Commission (ACCC).
The ACCC’s third insurance monitoring report, since the reinsurance pool started operations on 1 July 2022, says however that 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.
Pool membership
The ACCC’s 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.
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.
The Australian Government established the cyclone reinsurance pool in 2022 to help make insurance more affordable for households and some small businesses that are at higher risk of cyclones. The pool, which is administered by the Australian Reinsurance Pool Corporation, supplies reinsurance to insurers without a profit margin, reducing the cost of reinsurance for insurers.