The House of Representatives Standing Committee on Social Policy and Legal Affairs inquiry into claims processing (the Inquiry) will consider issues around residential strata insurance, particularly in Northern Australia, after the Gillard Government today released new Terms of Reference.
Assistant Treasurer Bill Shorten said "As I've looked more closely at insurance issues in Queensland, I've become aware the affordability of residential strata insurance has become an increasingly serious issue now that many people are renewing their strata title insurance policies."
"In particular I've been concerned about the news coming out of cities and towns like Cairns, Townsville, Port Douglas and others in the region, where anecdotal evidence suggests residential strata insurance is becoming an increasing issue."
"Representations from Labor and Coalition MPs further convinced me that residential strata title insurance should be in the terms of reference for the Inquiry," Mr Shorten said.
Chair of the Committee, Mr Graham Perrett MP, said "While the Inquiry has not, until now, been looking at residential strata insurance, we have been hearing about the same issues. I'm pleased to see the Government moving so quickly to determine the level of the problem and it makes sense for the Inquiry to add strata title to our wider terms of reference."
The new terms of reference will be added to the Committee's broader Inquiry into the insurance industry's response to the 2010-11 extreme weather events, during which the Committee has undertaken an online survey and held public meetings.
"This is an issue that cuts across areas of Commonwealth, State and local government responsibility, which means that action will be needed at all levels of government," Mr Perrett said.
Mr Shorten said "I thank the Committee for including an examination of insurance issues into its busy schedule and look forward to receiving their report in 2012."
23 November 2011
Attachment
New Terms of Reference Relating to Residential Strata Title Insurance[1]
That the House of Representatives Standing Committee on Social Policy and Legal Affairs also inquire into and report on the affordability of residential strata title insurance, particularly in Northern Australia, and factors influencing this, including:
- the magnitude of the increases in the cost of residential strata insurance over the past 5 years, the reasons for these increases and whether these increases are likely to be sustained;
- the ability of insurers to price risk and the availability of accurate data to allow for this;
- the extent to which there is a failure in the insurance market for residential strata properties either generally across Northern Australia or in some regions in particular, for example due to a lack of competition between insurers;
- whether consumer awareness of different insurance options should be enhanced;
- the extent to which the nature of body corporate arrangements are contributing to affordability difficulties;
- whether the conclusions regarding (a)-(e) provide justification for government intervention in the residential strata insurance market, noting the existing responsibilities of Commonwealth, state and local governments, for example:
- the Commonwealth Government has responsibility for insurance regulation under the Insurance Act and the Insurance Contracts Act and competition and consumer regulation under the Competition and Consumer Act; and
- state governments (and local governments where appropriate) have responsibility for strata title legislation, building regulation, land use planning regulation and specific state government interventions in insurance markets (for example home builders warranty insurance, compulsory third party insurance).
The Inquiry should have regard to the following principles:
- Individuals and businesses should be encouraged to insure themselves where practicable.
- Government intervention in private insurance markets is justifiable only where, and to the extent that there is clear failure by those private markets to offer appropriate cover.
[1] Residential strata (or community) titled properties have a body corporate (or owners corporation, strata company, community association or similar arrangement) holding property on behalf of individual owners. The exact legal form varies with state and territory legislation. Bodies corporate are unlimited liability entities, with individual owners having a joint and several, unlimited liability to the body corporate. These properties can take a number of forms, from duplexes to gated communities to small and large apartment buildings. Individuals own a portion of the property (a lot) and there is also common property, of which ownership is shared.