NIBA urges open mind on market intervention
The Productivity Commission should not dismiss the concept of government intervention in property insurance markets based on overseas experience, the National Insurance Brokers Association (NIBA) says.
Anecdotal reports from north Queensland suggest pre-1985 buildings are effectively uninsurable because of their vulnerability to cyclones, NIBA says in a supplementary submission to the inquiry on natural disaster funding.
It says the cost of property insurance for many others in the region is regarded as unaffordable.
“Any decision to preclude government intervention in the property insurance markets in northern Australia should only be taken when all potential consequences of a decision of this nature have been examined and understood.
“Overseas experience is not a valid basis for failing to deal with this most important community issue.”
NIBA points to the Australian Reinsurance Pool Corporation as an “excellent example of a strong and positive government response to a very difficult market situation”.
The Productivity Commission’s draft report says international experience has shown government intervention is overwhelmingly ineffective and creates a moral hazard as well as financial risks.
“Governments have had to bear significant costs following large natural disasters because their insurance schemes failed to accumulate adequate reserves,” it says.
The Productivity Commission plans to forward its final report to the Government by the end of the year.