MICHAEL CLARKE:
The Federal Government has revealed the final plans for a $10 billion insurance pool for northern Australia which aims to improve affordability and availability of insurance in flood and cyclone prone areas. The Government has fine‑tuned the scheme after feedback on the draft laws. The Assistant Treasurer, Michael Sukkar, is in Townsville today and joins us on the program. Assistant Treasurer, thank you for your time this morning. What’s changed from the first draft legislation? What will we see that’s different with this legislation?
MINISTER MICHAEL SUKKAR:
Well, some minor changes around making benefits greater for strata properties, also for small businesses. The original draft bill which was out for consultation was very warmly welcomed, thankfully, because it will deliver on increased accessibility and affordability. We have appreciated the feedback and it’s also included consultation with insurers. The final draft or the final bill which I’ll introduce in the next sitting fortnight will deliver benefits that are about twice as much as what we originally thought. When we made the original announcement, we expected, at that time, that premiums would be reduced by about $1.5 billion over ten years. Through all the work we’ve done and the consultation that you referred to, Michael, we’re now expecting those premium reductions to be $2.9 billion over ten years so nearly twice as much as what we had originally anticipated.
MICHAEL CLARKE:
So, does that mean that more people will be included in those reductions or people who were already covered will just see a greater reduction?
MINISTER SUKKAR:
In most cases it will be greater reductions and that’s been the beauty of this process. We’ve been able to work closely with people on the ground – interested groups, individuals, businesses, lobby groups, chambers of commerce – and we’ve been able to tweak it in such a way that the benefits will be, by and large, greater for everybody than we originally expected. We’re looking at, for those with the most acute cost pressures, premium discounts of up to 46 per cent for homeowners, 58 per cent for strata properties and about 34 per cent for small and medium businesses. So really significant reductions. There’s still work to be done but we’re really pleased with where it’s landed and I’m looking forward to announcing more of those details today in Townsville with Phil Thompson, the Member for Herbert who has been – along with Warren Entsch and George Christensen – big champions for the re‑insurance pool in northern Australia.
MICHAEL CLARKE:
As you know it’s been a long‑festering issue if I can call it that, in northern Australia not just here in Townsville and north Queensland but every time there is one of those natural disasters, we see those increases. Is this now going to prevent those complaints or those concerns in the future as far as you’re concerned?
MINISTER SUKKAR:
I doubt it will prevent all concerns with insurance into the future. I think we’ve got to be clear about what this does. This will improve accessibility, it will improve affordability. We expect that it will enhance competition because we know that a number of insurers have spoken about the likelihood of increasing their presence or indeed entering the market in northern Australia for the first time now that this reinsurance pool is here. So, it will solve a lot of those problems, it will reduce premiums, as I said, in a really significant way. Will it solve every single gripe with insurance that people may have? I doubt it but it’s a big step to levelling the playing field because we know accessibility to insurance is just so important for the economic prosperity and resilience of north Queenslanders and of everybody in northern Australia. This is really the single biggest government intervention in the insurance market really in a generation and we’re very proud of what it will do, and we’ll have to keep working to make sure it continues to deliver for north Queenslanders. We are doing the heavy lifting here. We would encourage the State Government to remove their stamp duty which disproportionately hurts north Queenslanders. North Queenslanders are paying higher stamp duty and effectively subsiding other parts of Queensland. So now that the Federal Government’s done this, with a stroke of a pen, the State Government – in addition to these reductions – could reduce premiums even further by just abolishing their stamp duty, their tax on north Queensland. We hope that the establishment of this reinsurance pool will put the pressure on them that they need to make that decision which quite frankly they should have made a long time ago.
MICHAEL CLARKE:
You touched on it briefly there, Assistant Treasurer, before in your response where you said that you were hopeful that this would bring insurance companies to the region. As we know, for a lot of people if they’re looking for insurance, they may have very limited options and only expensive ones at that because a number of companies just won’t provide certain insurance in this part of the world. Does this legislation, will it change that? How does it encourage that greater participation?
MINISTER SUKKAR:
Well, it provides for mandatory participation in the scheme. So, for general insurers who have insurance premiums of over $10 million. So virtually all insurers will have to participate in the pool. That will encourage them to participate, we know that. They’ve said that publicly. I can’t make the announcement for them, but I would expect that one the pool commences on 1st July this year, that you’ll see a spate of announcements from insurers who are either increasing their footprint in north Queensland or entering the market for the first time. They’ve been very public about that because this takes so much of the risk away from them. The Commonwealth takes that risk, takes that pressure off which just encourages more and more completion. As you say, if you’ve only got the option of perhaps one or two insurers it’s hard to shop around and we encourage people to shop around. The reinsurance pool, by increasing competition, will mean people have genuine choices and a genuine ability to chase down the best deal, which is ultimately part of, not the entire story, but part of why we are expecting, as I said, 46 per cent reductions for homeowners, 58 per cent for strata property owners, 34 per cent reductions for small and medium businesses. It’s an important part of the entire puzzle and we are confident it will ensure that there are additional insurers in the region.
MICHAEL CLARKE:
Big issue for the region, as you know. We wish you all the best with your time in Townsville today.
MINISTER SUKKAR:
Thanks so much, Michael. Take care.