The Australian Competition and Consumer Commission (ACCC) will monitor the home insurance market in northern Australia for three years under an inquiry requested by Treasurer Scott Morrison.

Issues to be considered include:

• Pricing and availability of insurance
• Key cost components of pricing and how they have changed over time, particularly catastrophe risk
• Competitiveness of insurance markets
• Impediments to consumer choice
• Profitability of insurers and the extent to which profits are expected to change commensurate with risk.

The ACCC will begin monitoring the market from July 1 and provide interim reports by November 30 next year and November 30 2019.

A final report is due by November 30 2020.

“This inquiry will support transparency and the efficient operation of the residential insurance market in northern Australia,” Mr Morrison said.

The Federal Government announced in its latest budget that the ACCC will be allocated $7.9 million over four years to monitor prices, but there was no mention of establishing an inquiry.

The Insurance Council of Australia (ICA) says mitigation is the appropriate solution to pricing risk in the north, which is highly prone to natural catastrophes.

Previous reports by the independent Australian Government Actuary have concluded insurers are pricing risks appropriately in the region, and other reports have called for increased mitigation spending.

“[ICA] is pleased to have clarification on the scope of the ACCC inquiry into the insurance market in northern Australia,” spokesman Campbell Fuller told insuranceNEWS.com.au. “However, this investigation will not address the real problem – the impact of extreme weather on vulnerable communities.

“When mitigation is undertaken and lowers the risks to properties, insurers respond through reductions in premiums.”

National Insurance Brokers Association CEO Dallas Booth has also urged the Government to direct its efforts towards mitigation.

“It’s been our very strong view that Australia has to accept the environment in which we live, particularly the susceptibility to weather and natural disaster, and we have to mange our exposures far more effectively than we currently do,” he told insuranceNEWS.com.au.

“We are talking about resilience and mitigation.”

Canberra has yet to issue its response to Northern Australia Insurance Premiums Taskforce final report, presented to Treasury in November 2015.