Cyclone Reinsurance Pool will not deliver promised savings, government warns

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A promise to halve the rising cost of home and condominium insurance in Australia’s north will not be kept, the new federal government has said.

The Cyclone Reinsurance Pool (CRP) for residences, strata and small businesses in northern Australia, which was due to be in place from July 1, was the $10 billion brainchild of the Morrison government.

It was designed to correct a market failure that has seen homeowners in northern Australia pay premiums up to 20 times the cost of insuring a home in Sydney or Melbourne.

During this year’s federal election campaign, the former government said the reinsurance pool would provide savings of up to 46% for homeowners and 58% for condominiums.

But in releasing the modeling in Townsville today, new deputy treasurer Stephen Jones said the previous government had misled voters.

“There will be a reduction in premiums, but it will not be anything of the order of the [roughly] 50% halving of what the previous government promised,” Mr Jones said.

Deputy Treasurer Stephen Jones has accused the former government of misleading voters. (ABC News: Rachael Merritt)

The cost of some premiums will increase, warns the government

The reinsurance pool is designed to cover 880,000 policies nationwide, but the deputy treasurer warned that not all policyholders will see the same reductions.

“There will be people in certain low-risk areas for whom the premiums will go up,” Mr Jones said.

“We don’t know exactly [by how much] Again.”

An aerial view of houses surrounded by brown water under an overcast sky.
Townsville policyholders had to pay higher insurance premiums after the 2019 floods.(PA: Andrew Rankin)

The Deputy Treasurer blamed the discrepancy squarely on the former government and said the modeling should have been released before the election.

Changes again at three hurricane seasons

Australian Consumers Insurance Lobby chair Margaret Shaw has spent the past decade campaigning for insurance savings in North Queensland.

“I want to know if the insurance companies got the proper ratings,” she said.

Woman looks at camera books in background
Margaret Shaw has heard many horror stories about rising insurance premiums since she campaigned for nearly a decade.(ABC North Qld: Sofie Wainwright)

While the pool is due to come into effect tomorrow, Ms Shaw does not expect the benefits to trickle down for some time.

“It will be implemented by insurance companies over the next 12 months as their reinsurance contracts are renewed,” she said.

The assistant treasurer warned that it could take even longer for the savings to reach households.

“It should be no later than an insurance policy written for calendar year 2025,” Mr Jones said.

“It could be sooner than that. These are evolving policies.”

A thunderstorm is rolling over Airlie Beach on Wednesday morning, with major cleanup needed in the city.
Airlie Beach residents affected by Hurricane Debbie in 2017 were strong advocates for the pool.(ABC News: Jonathan Hair)

LNP member from Herbert headquarters in North Queensland, Philip Thompson, called on insurers to implement the changes as soon as possible.

“There would always have been an implementation period, but what we’re hearing from insurers about delays is ridiculous,” Mr Thompson said.

Insurance companies have until the end of 2024 to join the pool, membership of which is mandatory.

The new government has said it hopes the introduction of the pool will bring back insurance companies that had previously walked away from the market.

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