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ICA set for talks on guaranteeing lowered premiums

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The Insurance Council of Australia (ICA) will meet federal ministers this week to discuss the possibility of signing agreements that guarantee premium reductions if certain mitigation measures are carried out.

As insuranceNEWS.com.au has previously reported, the Federal Government has given an extra $50 million to disaster mitigation, upping its annual commitment to about $75 million.

Now ICA and its members hope to help direct those funds to the most effective projects, and insurers are willing to sign a memorandum of understanding (MoU) on premiums to facilitate action.

An ICA discussion document details potential public mitigation schemes in the Queensland centres of Townsville, Gold Coast, Cairns, Brisbane, Rockhampton, Mackay and Bundaberg, and Lismore, Western Sydney, Ballina, Narrabri, Newcastle, Coffs Harbour and Singleton in NSW.

The document says these mitigation schemes, added to the removal of state taxes, improved data and private mitigation works would result in premium reductions of more than 50% in some areas.

“We wanted to identify precisely where the high-risk locations are and what sort of premium compression you can get,” ICA Head of Risk and Operations Karl Sullivan told insuranceNEWS.com.au.

“We have focused on projects where we can measure and predict what the premium reduction could be.

“The MoU is a relatively new concept. Insurers that participate would agree on a minimum premium reduction, and some would go beyond the minimum.”

The discussion document details cross-subsidisation measures such as disaster pools that could be used if all else fails.

However, Mr Sullivan says the industry’s position on reinsurance pools has not changed.

“Pools are not the correct response,” he said. “They would put enormous financial pressure on the Government and, crucially, would not solve the problem.”