Since Cyclone Yasi, insurance premiums have soared in North Queensland as insurance companies have reassessed the risks of insuring properties in the region. Just how much premiums have increased is illustrated by some figures provided to the Joint Select Committee on Northern Australia by Townsville City Council (see chart below).
These figures were reported on page 133 of the Joint Select Committee’s Final Report Pivot North: Inquiry into the Development of Northern Australia, which was released last week. The figure for Cairns looks extremely high, so I’m unsure if it’s typical. That said, it’s pretty clear from media reports coming out of North and Far North Queensland that there has been a big spike in insurance premiums.
The Committee is right to see high insurance costs as a barrier to the economic development of the North, but I disagree with its recommendation that the Federal Government consider establishing an insurance office for Northern Australia that would provide subsidised insurance cover. That would be unfair to taxpayers in the rest of Australia, and it would ignore the possibility that insurers are right to be concerned about the risks from natural disasters in Northern Australia. Given these risks, the Government may want to reconsider promoting growth in the North beyond that which would occur naturally. Of course, it’s possible that insurance companies have over-reacted in the wake of Cyclone Yasi, but I think they’re in a better position to judge the risks than the Federal Government.
Thanks to Mark Beath of Loose Change for alerting me that the inquiry report has come out. Mark has commented extensively on strata insurance issues in Far North Queensland since Cyclone Yasi. For example, see Mark’s post: