- Reinsurance pool set to benefit homeowners in Northern Australia affected by cyclonic activity
- Calls for pool to be more transparent and insure those in other parts of Australia
- Includes cover for areas impacted by other natural disasters
The Federal Government has previously announced a reinsurance pool for cyclones and related flood damage in Northern Australia, with many homeowners paying significant premiums. Though generally well-received, it has been criticised for vague details along with not going far enough to protect vulnerable Australians.
The Financial Rights Legal Centre has made a submission to Treasury’s consultation on the pool recommending a taxpayer granted scheme should be accessible to all Australians who are deemed to live in high natural disaster risk areas – not just Northern Australia, per the government’s current proposal.
Karen Cox, the centre’s Chief Executive Officer, said that Financial Rights regularly provides financial counselling and legal advice to consumers nationally who are either underinsured or not insured due to the unaffordable nature of home and contents insurance in some regions throughout Australia.
“Access to insurance should be equitable and fair for all people across the country and government intervention to address insurance affordability should consider all areas and all extreme weather events, including bushfire,” Ms Cox said
“There must be incentives for homeowners to mitigate risks where measures are effective and cost-efficient.”
Karen Cox, CEO Financial Rights Legal Centre
Ms Cox added that along with more transparency for premium pricing and risk assessments, building codes and planning policies should be appropriate to risk levels in areas prone to extreme weather activity.
“People will change their behaviour with respect to risk mitigation if they are well-informed about the elements that make up their premiums,” she said.
“Greater contestability of pricing and risk assessments is needed. For example, enabling policyholders to challenge inappropriate, disproportionate or unjustified premium increases, will improve competition and increase knowledge of the risks and promote mitigation strategies.”
However, Ms Cox has also warned it is important that the reinsurance pool initiative does not lead to more complexity and variation in insurance – such as differentiating cyclones from other storms or limiting access to cover based on a households proximity to a cyclone event.
“Australians need standard cover and definitions so that they can compare apples with apples when buying insurance and are not caught out by unexpected exceptions and conditions at claims time.”