Brokers and insureds are closely examining the northern Australia cyclone reinsurance pool details and seeking more clarity and some changes, as a tight deadline looms for submissions on the draft legislation.

North Queensland Insurance Brokers Principal Ron Bellert, also Council of Queensland Insurance Brokers Vice President, says further information is needed in areas such as impacts from the $5 million sum-insured cap for commercial cover and on effects of the pool on insurer risk selection.

“Certainly, it is very welcome and it has been a long-time coming, and it has potential to have a significant impact on the cost of insurance in North Queensland,” he told insuranceNEWS.com.au.

“We will get a bit more clarification around a couple of those issues, and are working quite closely with the chamber of commerce in Townsville, and we will provide a submission.”

The Financial Rights Legal Centre has welcomed the draft legislation and says it particularly supports the Australian Competition and Consumer Commission playing a price-monitoring role to ensure savings are passed on to policyholders.

“This is critical to the success of the scheme,” Senior Policy and Advocacy Officer Drew MacRae told insuranceNEWS.com.au.

“We also strongly support the inclusion of discounts for policies that cover properties that have undertaken cyclone and flood mitigation.”

Whether the pool will deliver sufficient savings for consumers is hard to say at this stage, he says.

The Northern Australia Insurance Lobby (NAIL) has criticised the $5 million commercial cap as too low, says strata limitations will mean holiday accommodation buildings across the north will miss out and has questioned the potential savings.

Co-Chairman Margaret Shaw said she started the fight over insurance 10 years ago on behalf of Seastar Apartments at Airlie Beach, her home for 15 years.

“Ten years later we have a ‘solution’ which will have no affect on Seastar because it isn’t 80% residential,” she said. “The reinsurance pool is already a failure in my eyes and a waste of 10 years of my life.”

NAIL says the level of savings to be achieved by operating the pool with no profit margin is debatable, given profit margins for the reinsurance sector would be no more than 10-15%.

Consumers in the north need much larger reductions on levels they are now paying, with the group saying more mechanisms are required to ensure the most in need consumer are at worst saving 50%, or at best are paying close to parity with those in other parts of Australia.

The group also calls for a review of the pool before the proposed three-year timeframe, given that may be too long a wait if the legislation is not fit for purpose.

Insurer RACQ says it is reviewing the draft legislation and will "continue to work collaboratively" with the Federal Government.

"We are pleased to see a number of the items we felt important in the design have been adopted in the draft legislation – for example mandatory participation and a transition period," Group Executive Member and Community MJ Bellotti told insuranceNEWS.com.au.

"However, there’s a lot of detail that still needs to be determined before we can make a full assessment about the pool’s anticipated outcomes.

"For instance we’re unable to form a view about premium reductions to north Queenslanders until we receive pricing models and formulas. We remain committed to passing on any savings from the pool to members."

Submissions on the draft legislation are due by December 17. Click here for more information.