A government inquiry into strata insurance in north Queensland has found premium rates are 500 per cent higher than other east coast cities, which has caused investors to leave in droves.
A report commissioned by the Australian Government Actuary (AGA) investigating whether or not strata insurance premiums were amounting to ‘price gouging’ has found that strata premiums in other eastern states were barley 20 per cent of the cost of those in north Queensland.
With strata passing these costs on to landlords, it’s no wonder the rental market in north Queensland is feeling the brunt of the natural disasters that have swept the state over the past decade.
Speaking with Residential Property Manager, director at Campbell Real Estate NQ in Innisfail John Strano said the hikes had definitely impacted his business.
“We’ve seen landlords try to sell because of the costs, but no other investor wants to touch them. So it’s not just impacting my rent roll, but also my sales division,” he said.
However, according to the AGA report by Peter Martin, he did not believe insurance companies were neccesarily price gouging because insurance companies were allegedly under charging prior to 2010.
“By around 2010, insurers participating in the north Queensland strata market had formed the view that prices were too low for the risk being carried. The reaction from insurers was to set prices on a steeply increasing trajectory,” the report reads.
“These other centres [such as Sydney, Brisbane and the Gold Coast] are not exposed to cyclone risk in the same way as north Queensland. Thus, the actual claims experience data provides evidence of a substantial difference in insurance risk between north Queensland and these other east coast centres.”
But what about other cyclone-prone cities, such as Darwin? According to the findings, Darwin premiums were still 35 per cent of the average price paid in north Queensland.
“The average claims cost experience for Darwin over the eight-year period of the investigation was less than 35 per cent of that for north Queensland. In comparison, according to the data provided, the average premium rate in Darwin in 2012/2013 was about 40 per cent of the average north Queensland premium rate at the same time," the report stated.
“The cost of catastrophe reinsurance for exposure in Darwin appears to be significantly lower than the estimated cost for exposure in north Queensland.”