The Commonwealth-backed cyclone reinsurance pool has not delivered “substantial” premium savings since it commenced on July 1 last year, the Australian Consumers Insurance Lobby (ACIL) says in a report released today.

Citing feedback from brokers, the report says home insurance savings have been “modest” with premiums down by 10-20% and business insurance saw no savings at all. However strata insurance showed “reasonable” savings with rate reductions of up to 40% and even 50% in some cases.

ACIL says changes to the scheme are needed and urges the Federal Government not to wait for the legislated 2025 review to examine the effectiveness of the pool.

The report outlines areas where ACIL believes changes are needed to improve the scheme. These include broadening the geographical coverage of properties contributing to the pool, raising the sum insured limit of $5 million to $20 million and adding marine insurance to the pool.

The Insurance Council of Australia (ICA) has responded to the report. A spokesperson says the industry is committed to working with the Federal Government to improve the affordability and availability of insurance in northern Australia, including through the pool.

“At this stage it is simply too early to predict the impact on premiums,” the spokesperson says, noting that not all insurers have joined the pool.

The spokesperson says any inclusion of marina coverage in the pool would require comprehensive actuarial analysis, like the work that was undertaken on insurance product classes that are currently within the scope of the pool, to understand if there are any potential benefits. 

ACIL says broadening the geographical coverage of properties contributing to the pool has the support of many brokers it contacted to prepare the report.

A contribution from low-risk areas would have a nominal effect on premiums for southern consumers and ACIL estimates the financial impact would be less than 5%.

“However, its influence on premiums for northern consumers would be significant. This expansion not only enhances the overall effectiveness of the pool, but also offers opportunities for significant savings for those who are most reliant on its support,” the report says.

ACIL Chair Tyrone Shandiman tells insuranceNEWS.com.au “we need to stay the course and do everything we can to make this work”.

Allianz has also called for changes to the pool. A spokesperson tells insuranceNEWS.com.au the pool, which only covers cyclone-related flood damage, should be expanded to cover all residential extreme flood risk in Australia.

QBE, Suncorp, Hollard and Allianz have joined the pool and IAG is expected to join ahead of the December 31 deadline for major insurers. Small insurers have until the end of next year to sign up to the pool.

“This is an intentional design feature reflecting the complexity of the process,” the ICA spokesperson says. “This means policyholders in northern Australia should only expect to see any premium impacts once insurers move their reinsurance contracts into the pool.”