The Australian Competition and Consumer Commission (ACCC), the anti-competition watchdog, yesterday released an issues paper for its inquiry into the supply of residential building, contents, and strata insurance in northern Australia. The area to be covered broadly corresponds with the Northern Territory, those parts of Western Australia and Queensland that are north of the Tropic of Capricorn, and some areas just south of the tropic.
“The ACCC is investigating why insurance premiums have increased substantially in northern Australia over the past few years. Our Inquiry aims to identify the barriers that prevent consumers from accessing affordable, appropriate, and comprehensive insurance,” ACCC Deputy Chair Delia Rickard said.
“As a formal inquiry, we will use our compulsory information gathering powers to access information directly from insurers. This is something other inquiries have not been able to do. We are also seeking consumer and industry input on price, policy coverage, and any barriers to consumers getting a better deal,” Ms Rickard said.
Matters to be considered by the inquiry shall include but not be restricted to:
- the pricing and availability of insurance to consumers in northern Australia;
- the key cost components of insurance pricing in northern Australia and how they have changed over time, particularly catastrophe risk;
- the terms and conditions on which insurance is supplied;
- the competitiveness of markets for insurance in northern Australia;
- the existence and extent of any barriers to entry, expansion and/or exit in the supply of insurance in northern Australia;
- any impediments to consumer choice, including transaction costs, a lack of transparent information, or other factors;
- identifying any regulatory issues, or market participant behaviour or practices that may not be supporting the development of competitive markets for insurance in northern Australia; and
- the profitability of insurers through time and the extent to which profits are, or are expected to be commensurate with risk.
In May 2017, the Australian Government directed the ACCC to undertake the inquiry due to concerns about affordability and availability of insurance in the region.
The ACCC will be hosting a series of public forums so consumers can share their concerns directly with the ACCC. The forums will be held in November and December. The Commission must submit reports to the Treasurer by 30 November 2018 and 30 November 2019. The inquiry is to be completed and a final report submitted to the Treasurer by 30 November 2020.
In March last year, the Northern Australia Insurance Premiums Taskforce formed the view that mitigation is the only sustainable way of lowering premiums in the region. The Taskforce had been established to explore the feasibility of options to lower insurance premiums in northern Australia, where the risk of cyclones has caused affordability concerns.