The Northern Australia Insurance Premiums Taskforce’s final report recommends cyclone mitigation as the only way to reduce insurance premiums on a sustainable basis.

“It was widely considered by stakeholders that encouraging mitigation should be part of any government response to the rise in insurance premiums,” the report says.

“A concern is that policy measures that work only to reduce premiums may dampen incentives for mitigation.

“Further, without action on mitigation, the benefits of any measures taken by the Government to lower premiums would be reversed upon government exit.”

The report accepts mitigation is not easy, and an approach involving property-owners and insurers alike is required. 

“The approach should include improving communication and co-operation between homeowners and insurers – especially making insurance premiums more responsive to mitigation actions.”

The report recommends policyholders’ improve their knowledge of risks and retrofit options, and it calls on the Federal Government to reduce insurance taxes in its forthcoming statement on tax reform.

Assistant Treasurer Kelly O’Dwyer told the Insurance Council of Australia Annual Forum in Sydney this morning that homeowners’ concerns are easy to understand.

The report has cast doubts over government intervention in the insurance market.

Ms O’Dwyer says average premiums in north Queensland are 1.5 times those charged in Brisbane and 2.5 times Sydney and Melbourne.

She says the report shows government intervention could be “very costly to the taxpayers”.

Proposed options for a mutual or reinsurance scheme expose the Government to substantial risk of huge payouts, and a mutual could crowd out private insurers.

“The Government continues to consider the report and will release its response in the coming months,” Ms O’Dwyer said. “We will continue to consult and seek your assistance.”

More information in our regular bulletin on Monday.