A promise to halve the soaring cost of home and strata insurance in northern Australia will not be fulfilled, the new federal government says.
The Cyclone Reinsurance Pool (CRP) for northern Australian residences, strata, and small businesses, due to be implemented from July 1, was the $10 billion brainchild of the Morrison government.
It was designed to correct a market failure that has seen northern Australian home owners paying premiums up to 20 times the cost of insuring a home in Sydney or Melbourne.
During this year's federal election campaign, the former government said the reinsurance pool would offer savings of up to 46 per cent for home owners and 58 per cent for strata properties.
But in publicly releasing the modelling in Townsville today, new Assistant Treasurer Stephen Jones said the former government misled voters.
"There'll be some decrease in premiums but it won't be anything in the order of the [roughly] 50 per cent halving that the previous government promised," Mr Jones said.
Cost of some premiums will rise, government warns
The reinsurance pool is designed to cover 880,000 policies across the top of the country, but the Assistant Treasurer cautioned not every policy holder will see reductions.
"There will be some people in some low-risk areas for whom premiums will go up," Mr Jones said.
"We don't know exactly [by how much] yet."
Today the Insurance Council of Australia (ICA) said its analysis of the modelling showed nearly a quarter of home policyholders in Queensland would see premium increases.
In some cases, the premium increase could be greater than 20 per cent, according to the ICA.
"Insurers have been concerned that consumer expectations around premium decreases were never going to be met through this scheme, so today's release has provided transparency for the first time," ICA chief executive Andrew Hall said.
Mr Jones blamed the discrepancy squarely on the former government and said the modelling should have been released before the election.
Changes still three cyclone seasons away
Australian Consumers Insurance Lobby chair Margaret Shaw has spent the last decade campaigning for insurance savings in North Queensland.
"I want to know whether the insurance companies have been given the proper ratings," she said.
While the pool is due to come into effect tomorrow, Ms Shaw does not expect the benefits would flow through for some time.
"It will be implemented by insurance companies over the next 12 months as their reinsurance contracts come up for renewal," she said.
The Assistant Treasurer warned it could take even longer for the savings to trickle down to households.
"It should be no later than an insurance policy written for the calendar year 2025," Mr Jones said.
"It could be earlier than then. These are rolling policies."
LNP Member for the north Queensland seat of Herbert, Philip Thompson, has defended the figures his party used when announcing the CRP earlier this year.
"We always said for home owners facing the most acute cost pressures there would be savings of up to the figures used in March, based on the advice on the time," Mr Thompson said.
Insurance companies have until the end of 2024 to sign up to the pool, which is mandatory to join.
The new government said it is hopeful the introduction of the pool will prompt the return of insurance companies who had previously walked away from the market.
