Strata insurance added to government inquiry
Residential strata insurance has been added to the government’s inquiry into claims processing following issues surrounding affordability in the wake of recent flooding and extreme weather events.
The news follows the release of new terms of reference released by the Gillard government earlier this week.
Announcing the decision, the Honourable Bill Shorten, assistant treasurer and minister for financial services and superannuation, said increased focus on the rising cost of strata insurance had prompted the move.
He said: “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,” Shorten said.
The new terms of reference will be added to the committee’s broader inquiry into the insurance industry’s response to the extreme weather events of 2010 and 2011.
The inquiry will report on factors influencing affordability of the insurance, particularly in Northern Australia, including:
- the magnitude of the increases in the cost of residential strata insurance over the past five 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.
- Categories
- Insurance
- Tags:
- Honourable Bill Shorten, residential strata insurance
- Author:
- Angela Faherty, afaherty@financialpublications.com.au
- Article Posted:
- November 25, 2011
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