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Wednesday, 14 March 2012
Page: 2989


Mr EWEN JONES (Herbert) (16:46): I would just like to say to the previous speaker that, when the creek flooded and it was going into the South Esk, I just hope that the water quality going through to the Boag's brewery, with waters from the North Esk River, was still in pristine condition. It is very important. The North and South Esk Rivers are a national treasure, and Boag's premium is of course one of the great beers of the world.

I rise to speak on the Insurance Contracts Amendment Bill 2011. This bill changes the laws governing insurance in the wake of the 2010 and 2011 floods throughout parts of Queensland, New South Wales and Victoria. The coalition does broadly support this bill. We recognise the insurance problems that the natural disasters around the country exposed and created and we will give our support to these measures and help address them. We are, however, concerned with the implementation of the changes being made in the bill.

Specifically, this bill will introduce the standard definition of flooding for insurance contracts. This will address the problem that arose following the season of natural disasters where residents, many having lost everything as a result of flooding, discovered that their insurance did not cover them because different policies defined flooding in different ways. We saw the birth of a new word with 'inundation' when it came through. I had never lived through an inundation. When I was a kid in my home town of Texas, we only ever had floods. This created confusion and lack of understanding for policy holders, but creating a standard definition means there will only be one interpretation for flooding wherever it appears in the insurance contract. This is a measure that the insurance industry and the coalition have repeatedly supported over the last five years following other flooding disasters, and it has taken until now for this government to push this through.

This bill introduces a requirement for insurance policies to come with a key facts sheet. This key facts sheet is supposed to help consumers better understand prospective policies and be able to more easily compare and asses their options. While industry broadly supports this idea and in fact many insurers already provide something similar, we are still weighing the draft requirements of these. In the retail side of the motor vehicle industry, there used to be a thing when a friend of mine had a Ford dealership in Townsville. He said his first dealer arrangement was with Esanda and it said, 'We the undersigned agree that Esanda takes a lien over everything in this lot with the following exceptions,' and it was a two-foolscap-page document which covered the arrangement between him and his finance company. The last one I delivered to him when I was working for Capital Finance was about 400 pages long. That is where we have gone with this. It is not the government's fault, but it is the nature of litigation in this country that we are pushing these things. It is important to note that this bill only provides legislation that will enable these proposed changes to take place. While the coalition agree in principle with these changes, we will be waiting to see the changes in their legislative form to get a better idea of how these measures will be rolled out.

While we in North Queensland may not have experienced the flooding that has taken place in South-East Queensland, New South Wales and Victoria, we did suffer through Cyclone Yasi, one of the worst cyclones to hit the region in close to a century, and surely the biggest storm that this country has ever seen. Since that disaster, Townsville residents have been plagued with insurance problems, from companies pulling out of their North Queensland market to skyrocketing premiums. Townsville residents have been left wondering how they can pay for insurance cost increases on top of the rising cost of living that this government has presided over.

For Townsville, one of the biggest problems has been an increase in strata title insurance. I have had numerous people living in apartment complexes coming to me and complaining about the astronomical increases in body corporate insurance that they have been forced to swallow. Do not forget that the thing about strata title insurance is that with house insurance you can take a punt that you are not going to get a fire and no-one is going to chase you up, but not having strata title insurance is against the law and you are criminally liable under the strata title act; you must have this strata title insurance. Many of these concerns were heard at the strata title insurance inquiry that recently visited Townsville for a public hearing, and I would like to pass on my thanks to the member for Moreton for his proactive actions in bringing that inquiry to Townsville and Cairns. I would also like to thank both him and the member for Blair for the way they conducted that inquiry, especially the bits I saw in Townsville. It was clear to me that they were actively looking for answers, and I hope that their final report will reflect the sincerity and concern expressed to them by the attendees.

The attendees at the meeting in Townsville were predominantly self-funded retirees and pensioners. They are the ones who are most affected by these problems, and they are the ones who can least afford them and have been forced to cop these huge premium increases. We have asked them to come to a unit building as a cheaper way for them to see out the autumn of their years. They have to survive on a set income. They cannot cope with premium rises of nearly 700 per cent. They also risk the reduction of their capital base. If the unit dwelling becomes unaffordable and there is a market issue with too many properties on the market, the unit price will drop, making their lives more unsustainable.

Tom and Tina Pietzsch attended the hearing. They are self-funded retirees living in one of three apartments in a unit complex. The only shared facilities in the complex are a pool area and a lift. In 20 years the complex has made two claims—a small one after Cyclone Larry in 2006 and a slightly bigger one after Yasi last year. They have seen their premiums triple to $15,000 in one hit from before Yasi. When this was added to the maintenance and other costs that the body corporate fee needs to pay for, living in a unit suddenly became unattainable for Townsville residents.

I spoke to the widow of a friend of mine. She is living in a modest unit in North Ward, which is a central suburb in Townsville. Her concern was not so much how she could afford the huge increase in premiums. She does not have the option. She has to be able to afford it. She has no option. Her only option was to consider which foods she could do without. That goes into play in things like the health debate. We are talking about older people here, living in these things, who are going to end up not being able to survive or who will suffer health deterioration in a hospital. These are the things that people have to go through.

I also spoke to Mick Price, who is a mate of mine, about insurance in Townsville. Mick lives in a two-level apartment complex on the marina in Townsville. Over just three years, his body corporate insurance bill has risen some 690 per cent. Over those three years, his body corporate insurance premiums have risen from $27,000 to $187,000. In anyone's language, that is simply unsustainable. Part of Mick's problem is that there is simply no flexibility in the way they insure. They have three buildings which housed the unit dwellings. They have another building which acts as a garage and a shed for the complex. If they had the option to not insure the whole but to flexibly insure parts to different degrees, he would be happier. He would like to see flexibility over what products he could take. Being on the marina, they have absolutely no need for flood insurance, but they are still getting billed for it. When we have this problem with insurance costs in North Queensland, we need to be working with the industry to make these changes that could help bring premiums down. He would countenance an increase in excess—not to the extent of $250,000 but to, say, $20,000—to help lower that cost burden. I know that insurer Zurich said that for every dollar they received in premiums they paid out $1.15. So somewhere along the line someone is taking advantage of the system. If you increase the excess it will take away those things where people are claiming for fans, blinds and all those silly things that in the normal course of events you would not do.

I spoke also with Melinda Holborn, who lives in a block of townhouses on the banks of the Ross River. They went through Cyclone Yasi without the loss of even a fence paling. Still they saw in one year their insurance premium rise from $14,000 to $81,000. They shopped around and were able to get the price down to just over $50,000, but the pain is immediate and severe. Again Melinda wants to be able to insure with some sort of flexibility. Where she lives they have a tidal riverfront which is protected by two weirs and a dam, yet they are seen as high risk due to being a river frontage property.

I believe in markets. I do not want to see government intervention here. I believe we are seeing a short-term reaction which plays into the world market. I believe that as the financial markets contract worldwide underwriters will leave the market, making funds scarce. To compensate, insurers will have to raise the return on the investment to make it more attractive. Put these things together and you have rising premiums. I believe that the market will make a decision on the viability of the North Queensland body corporate insurance market. I believe that very soon some guy somewhere will be looking for margin and market share. They will look at the North Queensland market and decide that they should be getting some of this market and they will come in at a discounted price. I do not believe that CGU, which is the only company which is currently offering body corporate insurance to larger dwellings, should be vilified for raising premiums. I think they should be thanked for still offering a product. It is the big insurers of Queensland, and in particular Suncorp, who have made their commercial decision to leave North Queensland. They are still taking our car insurance, life insurance and home and contents insurance. They have just left this part of their portfolio. I would like to call on all North Queenslanders to weigh up their insurance and banking decisions with this in mind.

After 2011 proved to be such a horror year of natural disasters in Queensland and other parts of the country, a natural disaster insurance review was commissioned just over 12 months ago. Recommendations were received in September. After six weeks to consider these recommendations we have now seen this government defer 39 of the 47 recommendations that were made. Their biggest decision so far was to commit to further reviews. We have seen detrimental flooding come once again this year and we still have not seen much progress made on the lessons learned from the last lot of flooding. This government needs to get its act together and take decisive action on the review's full recommendations. The more we continue to delay, the more natural disaster victims we will have who cannot benefit from the lessons of past disasters.

Most people out there say they simply do not understand what is going on. They do not understand why their premium has risen so much. It would help if someone could give them a reason. But the people who come to my office are not making claims. It is not as if they have been making spurious claims. Cyclone Yasi came through Townsville and was basically a category 2.5. It was a big storm and I am not trying to belittle anything. There were lots of trees down but we did not cop anywhere near what Cardwell and Tully did. Those guys are the ones sitting there telling me that they just do not understand. They ask, 'Why is it that we are copping it in the neck at this very moment?' No-one can give them an answer. The insurance company says it is reinsurance. Nobody seems to be able to understand what is going on. We have asked people to move out of their family home into units on a fixed income and it is simply unsustainable. Those are the people we have to worry about because they are the ones who will be the collateral damage.

I support the measures taken in this bill, though it remains to be seen how successful the implementation will be. The natural disasters of the last 18 months have brought about many problems with insurance policies. While it is good to see measures being taken to address concerns associated with flooding, insurance problems are continuing to hurt North Queenslanders. I will be closely watching the government's response to the outcome of the strata title inquiry and doing whatever I can to ensure that this government and the insurance industry are working towards a solution. As I said before, I think the member for Moreton, who is heading this inquiry, has done a fantastic job and has come at this at the right angle. But we want to see what actually happens when the decisions and the recommendations have to be made. Thank you very much to for the opportunity to speak on this bill.