The House of Representative inquiry into residential strata insurance has received 388 submissions, with most coming from disgruntled property owners complaining about price increases.

The industry has made just four submissions to the inquiry: the Insurance Council of Australia (ICA), National Insurance Brokers Association (NIBA), CGU and Zurich.

The industry submissions defend the prices rises, arguing it’s a case of balancing risk against return.

ICA says strata unit holders are paying the same or less than households for their insurance.

“Strata title insurance in some areas of Australia has been heavily discounted in the past, compared to the technical risk price,” its submission says.

“Recent corrections to price, while very significant, now better reflect risk levels and the cost of capital associated with providing cover.

“Strata title property-owners in high-risk areas now (on average) pay a premium comparable or lower than the premiums payable by owners of stand-alone households.”

NIBA says it accepts there have been price increases in Queensland and WA, but argues this is based on adverse claims experience.

Arguing that there is no justification for government intervention in the strata market, NIBA says insurance for these risks “has traditionally not reflected the true cost of the risk that was transferred to insurers”.

“The recent cyclones and storms have resulted in insurers and reinsurers carefully re-assessing their experience and reviewing the terms and prices on which they are prepared to offer cover in these areas.” 

CGU says the significant price increases in northern Australia more accurately meet the cost of providing cover.

“The increase in premium prices for residential strata title properties has given rise to a myth that these properties have been disproportionately impacted when compared to homes and other forms of dwellings,” it says.

“The reality is that the premium increases were overdue and have resulted in residential strata insurance premiums now being more closely aligned with premiums for single dwellings of similar value.”

Zurich says that with some insurers exiting the northern Australian strata market and the increase in cyclones, the market is not as competitive as it was; but pricing now reflects the risks.

“Zurich prices according to the regulatory framework set out by APRA, which involves the use of internal and external actuarial resources,” the company says.

“While the volatility of catastrophes in north Queensland is difficult to factor into pricing, the industry has the information and tools required to price risk accurately.” 

The company accepts the recent price increases will come under scrutiny, but says more consumer education is required to explain the justification for the rises.

Public hearings by the committee will be held this week in Port Douglas, Cairns, Townsville and Mackay.