4 March 2016
Media Release - #2016020, 2016

Northern Australia Insurance Premiums Taskforce report released

The Turnbull Government has today released the final report of the Northern Australia Insurance Premiums Taskforce.

Minister for Small Business and Assistant Treasurer, Kelly O’Dwyer said the Taskforce was established to explore the feasibility of options to lower insurance premiums in northern Australia, where the risk of cyclones has caused affordability concerns.

"The Taskforce formed the view that mitigation is the only sustainable way of lowering premiums," Minister O’Dwyer said. "However, this is a complex area and the options canvassed in the report involve a coordinated response from insurers, governments and property owners."

The Report outlines a number of options to encourage mitigation including:

  • Strengthening building standards;
  • Better retrofits for older homes;
  • Government public works for water management and flood protection infrastructure;
  • Making insurance premiums more responsive to mitigation;
  • Better access to resilience rating tools; and
  • A mitigation awareness campaign.

"The Taskforce also considered options to more directly reduce premiums, such as the establishment of a mutual insurer or the creation of a cyclone reinsurance pool," Minister O’Dwyer said.

"It found that both options could possibly reduce premiums, but involved significant fiscal risk and any effect on premiums could not be considered sustainable.

"The probability of cyclone damage was modelled to assess the likely cost to the Government and found that for a scheme set to reduce premiums by 10-15 per cent on average, there is a 10-20 per cent chance that it would cost more than $2 billion over ten years, and a 5-10 per cent chance the cost would be more than $5 billion.

"The Government will consider the options contained in the report and intends to provide a detailed response by 30 June 2016.

"I would like to thank the members of the Taskforce, and the Reference Panel that supported them, for their detailed consideration of the issues," Minister O’Dwyer said.

The full report can be viewed on the Treasury website.