Warren Entsch (Leichhardt, Liberal Party) Share this | Hansard source

by leave—I rise to speak on the report of the Joint Select Committee on Northern Australia inquiry into the cyclone reinsurance pool. My community of Leichhardt and Far North Queensland has long grappled with the challenges of high insurance premiums and a continued diminishing lack of coverage particularly in relation to strata. I've dedicated more than the last decade to advocating for insurance affordability in northern Australia. In fact, my first proposal for a reinsurance pool was back in 2011. However, it's only been more recently that I've been successful in being able to prove market failure in northern Australia, so the fact that we now have a legislated reinsurance pool for cyclones is certainly a major step in the right direction.

Given that this is a whole new policy direction for government, it is understandable that there will be teething problems in ensuring that we have the right legislative process to effect the changes that we need for accessible and affordable insurance cover. I think the aspiration is reflected in recommendation 6, where the objective is to move for parity of cost across Australia. That's because, when we're talking about access and affordability for northern Australia, it's fair to argue that incomes are no greater and the cost of living is no lower than for the rest of Australia.

I think the review is very timely, but it is clear that we will require additional reviews. At the time of the inquiry, no insurers had signed up for the pool. Presently we have two: Allianz was the first and then Sure Insurance. But to measure the real impact, we have to wait for the rest of the major insurers to come on board. I'm pleased to see that this commitment has been made by all of the major insurers, and we will see a lot more participation over the next few months. This will give us a far better insight into the effectiveness of the pool and what we need to change. This is quoting from the review:

In view of the evidence given during the inquiry, the committee considers it premature to recommend significant changes to the pool now or to commit additional resources to its development, until such time as all the necessary insurers have joined the pool.

I think this is a very smart way of dealing with this.

With regard to strata, I'm eager to see how the reinsurance pool will impact on prices, but it's clear to me there are further opportunities that we must pursue at a state level. For instance, we need to encourage the Queensland state government to abolish stamp duty on insurance renewals and to review their compulsion of strata body corporates to ensure full replacement value rather than market value. In my view, if the option were available to both it would see an additional significant reduction in premiums.

The 48-hour limitation on floods associated with cyclones is problematic. The international standard for reinsurance pools is 168 hours. I think it is critical that we bring the pool into alignment with these standards. It's very clear that cyclone related flooding occurs well after that 48-hour period, and it's critical that we extend the time frame. I appreciate that this has created some hesitancy by insurers because of the additional coverage requirement to bridge the gap between 48 hours and 168 hours. This may well be reflected in additional costs to consumers. There are some additional concerns that I believe we need to pay close attention to, whether we're looking at insurance for farms and agribusinesses or, in particular, marine insurance. We also have to ensure the timely release of modelling data to insurers to allow for more informed and accurate decisions. The reality is that everybody agrees the reinsurance pool is the way to go. There is no doubt that this will require additional work, but we cannot simply sit back and do nothing.

I must say I found it unnecessary to target the previous government in the report, especially given the complexity associated with what was a first-of-its-kind type of policy. I'd just like to remind the government that, when it was in opposition, it supported the legislation without amendments. With something so important, I think it's absolutely critical that we take the politics out of it and focus on finding a workable solution for the challenges. If we can get it right with the cyclone reinsurance pool, there may very well be an opportunity to pave the way for providing a much broader natural disaster pool, covering all of Australia.

Finally, I'd like to take the opportunity to congratulate the new chair, the member for Lingiari, for her first report, and for the fact that she's been able to follow the tradition of the Northern Australian committee to put forward a fully consenting report—something we've been able to do since the inception of the committee. Congratulations, once again, to the committee and to all the participants. I certainly look forward to working with her and the rest of the committee. I commend the report and I look forward to subsequent reviews once the majority of insurers have signed up. Hopefully, we can do that towards the end of this year.

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