Marion Scrymgour (Lingiari, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Joint Select Committee on Northern Australia, I present the committee's report Final report on the cyclone reinsurance pool, incorporating a dissenting report.

Report made parliamentary paper in accordance with standing order 39(e).

by leave—This is the Joint Select Committee on Northern Australia's second and final report on the operation and implementation of the cyclone reinsurance pool. The increasing prevalence and severity of cyclones has been a concern for many years, particularly in high-risk areas of northern Australia. At the time of drafting this report, parts of northern Australia had experienced the effects of ex-Tropical Cyclone Alfred, with devastating floodwaters still impacting many individual houses and entire communities.

One outcome of the increased claims for cyclone related damage has been the hesitancy of insurance companies to take on this ever-growing risk. The cyclone reinsurance pool is one of the major levers used by the Australian government to influence insurance affordability and availability in cyclone-prone areas of northern Australia, as the availability of insurance can be a major factor in people's decision to move from or stay in the region. Although the pool operates Australia-wide, it targets support to cyclone-prone areas—in other words, much of northern Australia. The pool commenced operations from 1 July 2022.

This inquiry was to examine whether the pool is operating as intended and meeting its policy objective of improving insurance access and affordability in cyclone-prone areas of Australia. Some of the outcomes so far: the committee acknowledged that the pool has been in operation for only a short time, so it would not be unreasonable to expect significant changes to the overall cost of insurance premiums to consumers at this point. However, as noted by the Australian Competition and Consumer Commission, or the ACCC, in September 2024, the pool is beginning to deliver premium relief in some regions facing higher risk of cyclones.

Unfortunately, as the ACCC also acknowledged, these premium reductions are being offset by premium increases caused by other cost increases, such as higher building costs. Throughout the inquiry, stakeholders from all sides agreed that the pool is beneficial; however, many had differing ideas on how to improve its operations, including whether it should be expanded by lifting the sum-insured limits, extending the 48-hour period for flooding to be considered cyclone related, including marine insurance and introducing a national ongoing resilience program on a permanent basis to improve household resilience.

These are complex economic issues, and the committee has recommended that the Australian government investigate and provide clarity on its position on these potential changes to the reinsurance pool. One of the purposes of the pool is to provide incentives to reduce and mitigate the risk of eligible cyclone losses. However, whether or not discounts are ultimately given to insurance policyholders for mitigation remains obscure.

In the report, the committee has called on insurers to publicly commit to greater transparency on how mitigation impacts insurance premium costs both for individual insurance holders and for overall impacts to premium. The report notes the considerable efforts of the Australian government to provide financial relief to individuals impacted by these disasters.

However, the committee was also persuaded by arguments that more can and should be done given the science indicating that climate change will lead to increased severity and intensity of weather events over the coming decades. Given the importance of mitigation and resilience to reducing premium costs, the committee strongly recommends the Australian government support the ongoing national resilience program on a permanent basis. In addition, the committee has recommended that consideration be given by the Australian government to funding cyclone damage mitigation by a tax offset or by direct subsidies to eligible householders in northern Australia who engage in household resilience and mitigation.

Noting higher insurance premiums attract higher GST, the committee has also recommended the Australian Competition and Consumer Commission, in its insurance monitoring role, investigate the impact of current taxation methods on insurance premium pricing. To aid the work of the ACCC, the committee has further recommended that the Australian government fund the ACCC to continue its insurance monitoring role until at least 2030 and consider expanding its remit to examine the extent to which insurers are reducing their insurance premiums in response to mitigation and resilience measures. The committee not only took evidence from those insurance bodies but also looked at recent events that have unfolded across northern Australia. There are concerns about housing, and more and more people are walking away from having insurance. That is certainly something that needs to be addressed. and the Australian government will certainly look at a number of recommendations. I know that another committee, the economics committee, has certainly been looking at some of this, so I look forward to some of that coming through from that committee in the next parliament. But I won't talk any further because I know one of the Nationals or Liberal members will speak.

In summing up, I do want to thank the deputy chair, who will be retiring from this parliament. I think it's been a good committee. While there is a dissenting report with this final report, I think all members have tried to work together in the interest of the electorates we represent that have been directly affected by these issues. I do want to thank Mr Willcox and all of the other members of the committee and I want to thank the secretariat for all of the work. It has been interesting. I'm sorry I missed the last meeting with those insurers, but we promised that we would get this last report through. I will wait to hear what Mr Willcox says.

Andrew Willcox (Dawson, Liberal National Party) Share this | Link to this | Hansard source

I rise today to support the chair of the Joint Select Committee on Northern Australia and the final report of the inquiry into the cyclone reinsurance pool. Just on the wording, there are a couple of extra statements that have been added, so it's not quite a dissenting report. The committee worked very well together. The chair and deputy chair gave us a lot of opportunity to be involved with things, and I think we put some very good recommendations forward. There are eight recommendations in total, and I would really like the government of the day to have a good look at those recommendations, because a lot of good work has gone into this.

This is our second report. We had the first report tabled in March 2023, and that was a little bit early. The whole insurance pool was in its infancy. It's fair to say it's still quite in its infancy. The big insurance companies, the ones that have a book value of over $300 million, had to be in by December 2023, and the smaller insurance companies, with a book value of less than $300 million, had to be in by December 2024. That was only a few months ago, so we haven't seen the full effect of what this reinsurance pool has been able to do yet. It's fair to say that so far we have seen some savings. However, some of these savings have been eaten up because of the increase in costs of building. Building costs have gone up 30 or 40 per cent, so, any time they have had some savings within the insurance premiums, they seem to have been gobbled up. That is something that we do have to have a good look at.

Recommendation 2 is about marine insurance. We've actually asked the government to have a look at that. I'll just read that one:

The committee recommends that the Australian Government publish modelling on the cost and benefits of the inclusion of marine insurance in the Cyclone Reinsurance Pool.

That's quite important. We have a lot of marine operators who have been asking us if we can have a serious look at that, so I hope that the government will have a look at that.

I would like to take the opportunity to thank the secretariat. They have done a tremendous job on this. Our secretariat has bounced around a little bit, which has created a couple of headaches, but Alan and Ros have been with us through these last reports, and they've done a very good job.

We pay way too much for insurance in northern Australia, and something has to be done. I'm not necessarily wedded just to this reinsurance pool. If we have to tweak it in some way, then that's what we'll have to do. Some ideas have come forward about stretching out the flooding component of it; let's have a look at that. It's still in its infancy. I think it's got a long way to run, but it's certainly a good vehicle for what's happening so far.

I won't monopolise the time. I would like to thank the chair, Marion Scrymgour, for how she involved everyone. I really want to thank the deputy chair, Warren Entsch. He's been on this committee for quite some time. This week will probably be his last week in this place. He does some outstanding contributions and works really hard on this committee. With those few words, I think this is an outstanding report, and I commend it to the House.