The National Insurance Brokers Association (NIBA) has called for a fresh examination of government intervention to address high premiums in northern Australia.

It says premium impacts from cyclonic wind damage in the north could be curbed by a reinsurance or pool solution, leaving more routine risks to be insured by the normal market.

NIBA CEO Dallas Booth says improving community resilience through land use planning and building standards remains a top priority, but a government program of some sort should be considered.

“Some mechanism of that nature is probably the only effective way that the cost of property insurance in northern Australia is going to be alleviated, particularly for domestic and strata [policies],” Mr Booth told insuranceNEWS.com.au.

NIBA flags the option in its submission to the Australian Competition and Consumer Commission’s Northern Australia Insurance Inquiry first interim report.

The report makes 15 recommendations for early implementation, seeks comment on 13 draft proposals and identifies five areas for investigation this year, including “measures to further improve insurance affordability and availability”.

NIBA says it is impossible for insurers to spread the cost of claims in northern Australia across the rest of the population.

“An insurer providing cover in northern Australia that sought to reduce premiums in that region by charging higher premiums elsewhere would be uncompetitive in those markets, against an insurer not providing cover in the north.

“This suggests it may be desirable to examine the potential need for some form of government intervention, which would take some of the high cost of extreme weather events out of the insurance pool.”

NIBA says the high costs could be met by an alternative funding mechanism that leaves the underlying market to continue operating in an efficient and competitive manner.

“This tends to indicate some form of reinsurance solution,” it says.

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