Strata insurance could become the Achilles heel of the insurance industry.

The House of Representatives inquiry on residential strata title insurance has just held its public hearings in Northern Queensland and the insurance industry has not come out it very well.

This was on top of an impressive 388 submissions to the inquiry from strata property owners – and it was hard to find one that had a good word to say about the industry.

Lack of insurers in the sector, massive rate rises and inconsistencies on geographical ratings were common themes in both submissions and at the public hearings.

The inquiry was told by witnesses they had approached a number of insurers after premiums started to rise dramatically, but many of the major companies refused to quote for Queensland strata properties.

In one case the owner approached 13 insurers and all refused cover. The property is now uninsured.

Margaret Timble, a unit owner in Palm Cove, told the inquiry her premium was $3697 in 2008, but rose to $9185 in 2010 and last year the unnamed insurer wanted $36,000.

“Luckily we were able to find another insurance company and we got insurance at $12,470, which although it is a vast improvement on $36,000, it is nearly a 400% increase in three years,” she told the inquiry.

“We have had virtually no claims in that time.

“It has lots of huge trees around it and despite being only one block back from the beach, it sustained no damage in any of the storms or cyclones that we have had.”

Ms Trimble also cited a strata building in Port Douglas in which she has an investment property. The building consists of 54 one-bedroom units where there have been 19 claims valued at about $17,000 since it was built in 1982.

Before last year, the strata premium was $16,047, but this jumped to $62,374 last year.

“We have managed to get that down to $42,454 by having the place revalued and taking higher excesses,” she said.

Rents for the units have fallen to $190 a week, Ms Trimble said. With rates of more than $1200 for the half-year and body corporate fees of about $3700, the additional insurance cost mean she is losing money on her investment.

Ms Trimble says the premium increases cannot be justified by insurers claiming the area was affected by Cyclone Larry or Yasi.

Inquiry Chairman Graham Perrett says Port Douglas has not had any cyclones for the past 20 years, but admits there is no pattern as to where cyclones strike land.

Committee member Warren Entsch told the hearing most buildings damaged in cyclones were built before 1976, when the building codes were altered to make the properties stronger.

“The overwhelming majority of the damage in cyclones that have hit the coast in the past 30 or 40 years has been done to buildings that were not built to that cyclone code,” he said. “That is the point the insurance companies do not recognise.”

Ms Trimble says insurers only want to insure where “the going is good”.

“It’s a bit like the airlines. They give you wonderful service between Sydney, Melbourne and Brisbane, but if you live further away you get the lesser service,” she said.

“I am concerned that where the impact is low, some of the insurance companies are happy to be in there and are very competitive; but as soon as it is a little bit hard, they do not want to be involved.

“My contention is, why should they be allowed to pick and choose?”

But Mr Perrett cited the Insurance Council of Australia’s submission on how risk is priced to explain the premiums rises in Queensland.

“I get the impression there is no retrospective goodwill,” he said. “There is no point saying, ‘20 years ago we’d never had it so good,’ because insurance is obviously all about future risk.”

While Mr Perrett was offering an olive branch to the industry, he did warn that the committee would be looking at how to investigate broader concerns on insurance premiums.

This does not sound good for an industry that has already been under scrutiny over flood cover, and has been forced to participate in a seemingly endless parade of official inquiries and reviews.

Insurers should take care to ensure the strata insurance issue doesn’t become the catalyst for yet another round of kneejerk regulation.