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Wednesday, 21 March 2012
Page: 3795

Mr ENTSCH (Leichhardt—Chief Opposition Whip) (16:50): by leave—I would just like to take a few moments to also associate myself with this report by the Standing Committee on Social Policy and Legal Affairs. In the first instance I would like to thank the chair and the committee for being prepared to move so quickly after dealing with the flood report, acknowledging the challenges that were being faced in Northern Australia by the emerging unaffordability of strata insurance. Public hearings were held in Port Douglas, Cairns and Townsville. We also had a videoconference in Mackay, and there was a further public hearing in Canberra. It became very evident very quickly that the rising premiums and the lack of competition seemed confined to the Northern Australia and Northern Queensland markets.

There was also a problem, given that there is a mandatory requirement in relation to strata title insurance. There was a concern that insurance companies were choosing low-risk markets and in doing so were creating regional inequities. Unfortunately, there is currently no requirement for insurance companies to offer strata title insurance and therefore there is no regulatory requirement to ensure that affordable insurance is available in all areas of Australia. It is interesting too that the insurance brokers in North Queensland were suggesting that the situation was indicative of a market failure, and evidence that was presented by Mr Dallas Booth, the CEO of National Insurance Brokers Association in Australia, conceded that the market was struggling in Northern Australia. He said, 'I cannot deny that it is getting very close to market failure.'

That was the challenge that we had. As the chairman rightly said, there were a lot of stories that were put into it, a lot of horror stories in fact about insurance. I think there were 400-and-something submissions to the inquiry, which is amazing. The recommendations that have come out of this, while they are not going to fix the problem immediately in relation to affordability, are certainly going to start a journey, if you like, that will hopefully start to bring some sort of conclusion here that will allow people to be able to afford their insurance again in this area.

The recommendations that came through I think were very good, particularly recommendation 2, where the committee recommended that the Australian Prudential Regulatory Authority conduct a review of the risk assessment methodology and in particular the failure to consider the changes in building codes and the cost of reinsurance. The others recommendations I would also like to mention include that the Attorney-General conduct a review of the state and territory legislative and regulatory requirements around strata insurance and looking at options to provide strata complexes with greater flexibility in their choices of insurance arrangements, including availability of tailored arrangements that may offer capped insurance to cover non-essential assets infrastructure.

As I said, this is not a silver bullet but I certainly look forward to having this presented into an area of mine which is greatly affected by this particular situation. Though there is no silver bullet, I think it needs to be remembered that there is a legislative requirement for strata property owners to be covered by insurance and this in itself is a guaranteed market for insurance companies. Therefore I think insurance companies could play a significant role in immediately easing the insurance crisis faced by strata title property owners in Northern Australia by recognising a social obligation and re-entering the market with affordable insurance. I would expect this would be far preferable to waiting for government intervention. I commend the report to the House.