Do either of you have any solid information about this, how do know that higher premiums in NQ is unfair?
Just by numbers you could garner that. 1974 and 2011 floods in Brisbane, the hail storms in Springfield, the Floods in 2011 on the Darling Downs and Range, the Tornado/Storm in the Gap and so on. The numbers of properties damaged, destroyed would be far greater than the cyclone damage to properties in NQ. If we talk commercial crop damage then NQ probably has bigger losses but these are not Household claims.
2011 Floods in Brisbane
24,696 properties completely or partially flooded in areas built up before 1978
19,786 were residential properties
1243 properties completely or partially flooded in areas mostly built up after 1978
1017 were residential properties
5.1 per cent if the whole area of the city of Brisbane was flood affected
94 Brisbane suburbs were affected by floodwater
Over 400,000 tonnes of rubbish removed
So around 21,000 homes affected by a single event, plus all the infrastructure affected
1974 again had many houses affected (around 8,500)
These are only the major flood events but localised flooding and damage occur every year and often multiple times a year in the Brisbane region.
The Gap Storm of 2008
Recent Hailstorm
2014 Hailstorm
Compared to Townsvilleâs worst storm in 40 years (2012 with 1972 being Cyclone Althea)
100 homes damaged, lets compare that to the numbers in Brisbane and SE corner in 2011.
Cyclone Althea â84 individuals left homelessâ compared to Brisbane 1974 is just a pittance of numbers.
If you look at the Severe Storms Archive at http://www.bom.gov.au/australia/stormarchive/ you can generate a report in which SE Qld appears as suburbs (they donât label by City for Brisbane but they do for NQ Cities and Central Qld) and has a great deal of representation.
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I see no numbers here, I see a list of events. Insurance is a statistical game based of estimates of likely payout which is derived from the chance of events occurring combined with the probable cost if they do. This is not something you can work out on the back of an envelope or guess by reading the news.
I do understand Actuarial processes, but I also understand the political noise a larger population makes.
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Townville seems to miss the most severe cyclones and is drier than areas usually hit.
Having visited Innisfail about 6 months after Cyclone Yasi, almost 100% of buildings sustained some sort of damage with many significant damage,âŠthe nature of damage was very different to the 2020 Brisbane hailstorm (which our house was in the firing line).
A supercell in Brisbane hits a small percentage of houses with significantly lower damage than a cyclone which tends to cause some damage to everything in its path.
The costs for a supercell in a city could be similar to a cyclone say in Innisfail, but the cost base is spread differently. If say 1% of houses in Brisbane are damaged (which would be an high percentage than reality) compared to say 95% in Innisfail, the cost is spread over more houses in Brisbane reducing exposure of insurance companies. In Innisfail, such spreading to cushion the financial risk is not as possible.
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Frequency also plays a part and SE Qld has for itâs area a decent frequency of damage. I know that when it comes to spreading risk the risk is not shared evenly and when premiums went to rise in SE Qld the Govt came down heavily on the Insurers who then made some concessions, this more often than not does not get reflected in NQ. It is just a fact of living up there that equity does not occur, even in regards to infrastructure such as Highways.
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I suppose the inequity is that the risk isnât spread over every policy holder within Australia. This wouldnât be seen as fair as those in low risk areas will pay significantly more to subsidise those in high risk areas. A bit like everyone paying the same for comprehensive car insurance irrespective of oneâs driving history. Those who get the advantage are those which are high risk to the insurer.
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There is a difference between car insurance and home insurance. Everyone could be âencouragedâ to purchase a 1200cc Denbeigh Super Chauvinist Mk II Deluxe with an optional 360 degree inflatable rubber bumper bar through premiums, yet everyone would be able to go about their business, shopping, and commuting, perhaps with less style and panache than with their current drive.
OTOH if home premiums reflected 100% of the regional risk of bush fires, floods, cyclones, and so on, it would do more than just encourage people to relocate to specific metro areas. The remaining residents would be independently able to rebuild or would be the types to walk away when âitâ hit. The outcome of âpremium driven migrationâ could cause the continent to tip with the SE going under water and FNQ to Perth heaving upwards into the sky with the remaining residents sliding toward you know where.
Although insurance companies do not make public policy, in the case under discussion if the actuaries charged 100% of the risk for home insurance (without exclusions for this and that that would be most probable to cause claims) it could attract government attention as it could easily stymie decentralisation to certain parts of the country. Whether that would be good, bad, or indifferent is another topic.
You seem to feel rather put upon, that you are not given equal treatment by authorities who build roads as well as insurers. There is a broad issue of how more remote areas are treated in comparison to more densely populated ones regarding health and many other services. Some authorities (like health services) actually measure inequality of outcomes and can show the link to lack of resources in the bush.
Is there any such measure of inequity of insurance premiums?
The observation that your premiums are higher than others does not necessarily mean you are not getting fair treatment. It is possible that the playing field is completely level or that even with higher premiums you are being subsidised by those in lower risk areas. Without some real data we will never know.
The ACCC has been looking at the cost of insuring in the north over the previous 3 years.
The final was published Dec 2020. Follow the link.
The ABC has also provided relatable commentary.
Whether this changes anything, it depends?
The ACCC final report is nearly 600 pages. The recommendations are extensive, and worth the shorter 10 pages they span. I picked up a number of points from the recommendations. My interpretation.
- A direct government subsidy of insurance costs for the impacted regions may be the only reasonable and workable solution to provide affordable premiums. IE that sustain the viability of the impacted regions.
- Insurers appear to be neglecting to pass on discounts to properties which are lower risk due to better construction and protection.
- Government planning and development approvals should take into account insurance risk in where development is permitted.
- There is uncertainty in the level of risk into the future.
There are many other significant recommendations and observations.
A most difficult scenario, as for the Mackay region resort mentioned in the ABC report. It has been permitted development in a very exposed and high risk location. To the benefit of the developer a premium site. Should the community now be asked to wear the cost of subsidising their insurance for what in hindsight was a bad decision? How does anyone resolve developers desiring to build in exposed idilic one day trashed the next locations and the need to minimise insurance risk/cost?
One only needs to look to the regular destruction of Whitsunday Islands resorts to realise that those after a quick buck are yet to learn how to build sustainably for a full force Category 5 cyclone with tidal surge on a king tide.
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Hope you get a satisfactory outcome.
Per the recent posts it is a topic with a lot of interest. It has taken the ACCC, three years of enquiry, two interim and a final near 600 page report to understand and quantify. Some can only encourage government to respond to the ACCC. North Qld now has an opportunity to do the asking of itâs local MPâs.
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Our local Federal MP, Warren Entsch, has been campaigning to get action for years.
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Thank you Mark
See page sixty for the summary of how insurers set premiums.
The report shows premiums are high and have been rising in the north but says:
The components of technical premiums vary considerably between insurers. However, it is clear
that the main driver of higher technical premiums in northern Australia is the higher natural peril
risk. Premium components for cyclone, and in some places flood, make up a large proportion of
technical premiums in northern Australia.
To understand âtechnical premiumsâ you need to read the report. There are other components added on to technical premiums but nowhere does the report talk about these being unfair, viz:
We have not seen evidence to suggest that insurers are taking an unreasonable approach to
setting the technical premium in northern Australia, or that technical premiums for northern
Australia are unjustifiably high.
As community rating and cross subsidisation across regions
has been wound back, this generally resulted in premium increases for consumers in higher risk
properties throughout northern Australia.
In other words one factor in price rises is subsidy reduction.
Profitability in northern Australia has been poor:
Over the 12-year period to 2018â19, based on data supplied to the inquiry, insurers in northern Australia have experienced an aggregate gross loss across home, contents and strata insurance products of approximately $856 million in real terms (including a loss of $208 million in 2018â19).
Finally on page 193 they reach the conclusion that
If governments want to provide immediate relief to consumers facing acute affordability pressures, they should consider direct subsidies over other measures
Looking at whether âIt is just a fact of living up there that equity does not occurâ depends on what you mean by equity. If it means paying the price for the risk of the coverage then the report says equity does occur. If it means paying similar premiums to southern states regardless of risk then it does not and will only occur if subsidies are increased.
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Whilst at our local shopping centre this afternoon, I was talking with a lady who was parked next to our vehicle about how massive the dual cab 4WD she was driving was.
She explained that they had bought a brand new Honda SUV and some female ran a red light and smashed into it. They have been waiting months for the repairs to be completed and they have been told it will be another month.
I asked if she received a loan vehicle, and she replied they were supposed to but did not get one.
I asked who the insurer is and she advised Vero. They had hoped the vehicle would be written off and replaced but Vero refused as the repairs were $5,000 less than the limit.
Unsurprisingly, she said that they will be looking at changing their insurer.
Apparently Vero is only sold through insurance brokers so there would be no way of knowing if a premium is correct.
Decades ago, we had all our business insurance through an insurance broker who I now believe was robbing us blind.
After we had sold all of the operations except for one business, I took out insurance for the same risks and amounts with Suncorp through another broker for a fraction of the price we had been paying.
Of course, the higher the premium Vero charges, the fatter the brokerâs commission is irrespective of any other âdealingsâ which may occur.
When you are dealing directly with the insurer, you can see exactly what the deal is and compare like with like.
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Thanks for your insights. The only reason I went ahead with Vero is because of a home loan through BOQ who used Vero at the time. Unfortunately I think most people take the âeasyâ way out & donât check if there are better deals. After speaking with other people I have realized I have been paying too much - I havenât had to make a claim so havenât had any experience on that side. I have been going through the process of looking in to Suncorp which is who Iâll probably end up going with.
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This is 100% words of wisdom.
It is very easy and convenient to accept what your existing insurer provides at renewal. We once accepted this like many do until about 10 years ago after reading something Choice publishedâŠan thereafter always shopped around.
Unfortunately it is near impossible for us to do our own shopping around due to age of some of the buildings on the property (one is 165 years old, while another is 182 years old) and running a business. Retail insurers wonât touch us and we rely on a number of good brokers to go out to the market (direct to underwriters), on our behalf to find underwriters which will provide cover. It is a similar exercise to shopping around retail insurers for a standard home⊠but a broker is a necessity as we donât have contacts in underwriters to try and find someone to provide the cover we need.
A good broker is an option, but it may not be the cheapest as one has to pay the modest fees for the service.
Weâve had Home and Contents Insurance for decades and never made a claim. Now we have paid off our mortgage do we really need it? Home Insurance can be claimed for very few and unlikely events - fire, earthquakes, floods and explosions and we live on a hill in the city! With thefts from properties declining and good security in place is Contents Insurance necessary? Insurance seems like a racket every company is getting into. What does Choice think?
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Welcome @MLC
I have moved your post into this already existing topic that may help address your questions. On this site there are a number of topics about home insurance and searching for them and reading them may help you as well.
If you are willing to bear the risk then giving up insurance is a decision for you and should take into account what you could lose if not insured. Value the contents and house as if you had to replace them and compare to premiums you pay, that should give you some idea if it is worth keeping.
I canât afford to take the risk and so I keep insured. In the 2011 floods we lost it all and the Govt payments met very little of our needs. The insurance payout allowed us to move and replace a lot of what we lost. Value was about 10 times what we had paid in premiums over the years. Since then we have had several claims for household accidental damage and again more than premiums paid.
Shopping around could help save you lots in premiums, many times just renewing ends up with a payer paying a âloyalty taxâ. I hope you find the best outcome for you and your circumstances.
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My experience is that home insurance, and I must say I am not in a high risk area for flooding or bushfire, is a very low price per year compared to the possible loss. So my premium is only around $700 per year vs rebuilding after a total loss of at least $300k
Contents insurance will be very nice to have if you actually get robbed, as I did on two occasions. New for old replacement.
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It also comes into play if the house burns down and one needs to replace what was lost in the fire.
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