At the meeting announcing Suncorp’s $1.1bn profit for the year outgoing CEO Patrick Snowball hit out against proposals for some kind of government backed insurance scheme to address sky high premiums in FNQ. He claims that the insurance market in Far North Queensland is “functioning and competitive” and that action should be focused instead on “protection and resilience” measures to ensure that assets are more cyclone and flood proof rather than simply replacing them like-for-like when disaster strikes. This is a stance also taken when the Productivity Commission report into NDRRA funding came to light back in October last year (see our commentary here).
We are no fan of the idea of the commonwealth (or State) getting itself involved in the insurance industry and certainly support the idea of greater emphasis on mitigation. However, what Snowball ignores is the fact that Suncorp (along with most other insurers) appears to make no effort to adjust premiums when mitigation measures are taken. Where is the incentive for homeowners to cyclone or flood-proof their properties (even more than existing building regs already require) when the insurers don’t adjust premiums downwards for those that do? We know of new or improved properties that came though Cat 5 TC Yasi virtually unscathed only to see premiums jump 100% the following year. The cries for some form of government intervention in the insurance industry are a direct result of the actions of the insurance companies themselves who (for the most part) seem happy to milk the North for whatever they can get content in the knowledge that consumers have little or no choice and, given the relative size of the market, unconcerned if they simply walk away.