Brokers in northern Australia say the cyclone reinsurance pool has produced mixed results for their clients, with strata customers getting the best premium savings so far, according to the Australian Consumers Insurance Lobby (ACIL). 

Strata insurance showed “reasonable” savings with rate reductions of up to 40% and even 50% in some cases. But business insurance saw no savings at all, and premiums went up in some instances. 

For home insurance the savings were “modest” with premiums down by 10-20%, ACIL says in a report examining the pool’s impact since it commenced on July 1 last year. 

A majority of brokers in the Cairns, Townsville, Mackay and Broome areas believe it is too early to tell if the pool is working. 

Trennt Cooper, Senior Account Manager with Cairns-based Optimus 1 Insurance Brokers, says the cyclone pool has not led to any premium savings for his home insurance clients. 

Mr Cooper, who did not take part in the ACIL report, believes it is still too early to judge the effectiveness of the pool and an examination of the scheme is needed to figure out what’s stopping insurers from reducing premiums. 

“We haven’t seen decreases at all at this stage. If anything, they have gone up substantially,” Mr Cooper told insuranceNEWS.com.au. 

“I think there needs to be an investigation into why the premiums are continuing to rise, and I think they need to ask the insurers because they will know why. There must be something that we are not aware of that is causing insurers to raise premiums.”   

Asked what he thinks of the ACIL report, Mr Cooper says everyone wants the pool to work, “whether that is in its current setup or with changes made to help the savings flow through to the policyholder”.   

“With the premiums continuing to increase, my main concern at this stage is about trying to work out why the savings are not being realised,” Mr Cooper said. 

Matthew Williamson, who runs his brokerage Good Cover in Bangalow, NSW, is not surprised the pool has failed to deliver the premium savings that some have been anticipating. 

“There’s been no change to the premiums and that’s because the risk hasn’t changed,” he told insuranceNEWS.com.au. 

“The Australian Government is not better at pricing risk than Munich Re or Swiss Re or any of the other reinsurers. So there is no reason why the premiums will change.” 

Mr Williamson believes risk pricing is best left to the insurance industry. As he sees it the pool “just distorts the marketplace”. 

“The Government is taking on an enormous amount of risk with the pool. Where they should be spending the money is in tangible outcomes, not stepping into risk pricing.” 

QBE, Suncorp, Hollard and Allianz have joined the Commonwealth-backed pool, a $10 billion reinsurance scheme aimed at easing long-running premium affordability issues in northern Australia. 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. 

Broome Insurance Brokers Director David Keys, who took part in the ACIL report, says it is a bit early and “unfair” to be commenting on the pool when not every insurer has joined the scheme. 

“It just seems unreasonable for us to be forming an opinion about how it is performing,” he told insuranceNEWS.com.au. 

His experience so far tells a different story. Mr Keys says before the pool Allianz did not offer home insurance products in the Broome region. “They have gone from not offering to offering cover here in this region. And that provides competitive pressures and will have a good impact on pricing for our residents here.” 

And there’s been “modest” premium savings with Allianz compared to insurers who were previously in Broome but were not using the pool. 

“I think it’s going to be terrific,” Mr Keys says of the pool. “It will take a while [for the benefits] to flow through because it’s also new for the insurers. Joining is one thing but getting the systems and processes organised is a different thing.” 

He cites the example of QBE, which signed up to the pool in July. “QBE has joined but they haven’t altered their pricing.