Cyclone Reinsurance Pool won’t deliver savings it promised, government warns

A promise to halve the soaring cost of home and strata insurance in northern Australia will not be fulfilled, the new federal government says.

The Cyclone Reinsurance Pool (CRP) for northern Australian residences, strata, and small businesses, due to be implemented from July 1, was the $10 billion brainchild of the Morrison government.

It was designed to correct a market failure that has seen northern Australian home owners paying premiums up to 20 times the cost of insuring a home in Sydney or Melbourne.

During this year’s federal election campaign, the former government said the reinsurance pool would offer savings of up to 46 per cent for home owners and 58 per cent for strata properties.

But in publicly releasing the modelling in Townsville today, new Assistant Treasurer Stephen Jones said the former government misled voters.

“There’ll be some decrease in premiums but it won’t be anything in the order of the [roughly] 50 per cent halving that the previous government promised,” Mr Jones said.

A man in a suit stands in a street arcade, a camera is in front of him in the foreground of the shot.
Assistant Treasurer Stephen Jones has accused the former government of misleading voters. (ABC News: Rachael Merritt)

Cost of some premiums will rise, government warns

The reinsurance pool is designed to cover 880,000 policies across the top of the country, but the Assistant Treasurer cautioned not every policy holder will see reductions.

“There will be some people in some low-risk areas for whom premiums will go up,” Mr Jones said.

“We don’t know exactly [by how much] yet.”

An aerial view of homes surrounded by brown water under overcast skies.
Townsville policyholders had to pay higher insurance premiums after the 2019 floods.(AAP: Andrew Rankin)

Today the Insurance Council of Australia (ICA) said its analysis of the modelling showed nearly a quarter of home policyholders in Queensland would see premium increases.

In some cases, the premium increase could be greater than 20 per cent, according to the ICA.

“Insurers have been concerned that consumer expectations around premium decreases were never going to be met through this scheme, so today’s release has provided transparency for the first time,” ICA chief executive Andrew Hall said.

Mr Jones blamed the discrepancy squarely on the former government and said the modelling should have been released before the election.

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