On 3 October 2012 the AGA reported on the results of an investigation into the causes of premium increases for residential strata title insurance in North Queensland (NQ). Cumulative premium increases of several hundred per cent had been observed over the years leading up to 2012.
In that report the AGA concluded that a number of inter-related factors and a convergence of events led to the premium outcomes that had been observed. Those factors included:
- historical under-pricing;
- the cost of reinsurance; and
- recent losses caused by natural disasters and the associated accumulation of risk in NQ.
The AGA also found that while there was only limited commercial competition in the NQ strata insurance market, it was not clear that this had resulted in prices which were unreasonably high when assessed against the underlying risk.
Expanded study
In December 2013 the Government asked the AGA to conduct an expanded study into strata insurance pricing in NQ.
This expanded study is intended to put the NQ experience into a broader context. Specifically, the AGA have been asked to:
- consider the causes of premium increases in NQ, taking into account an 8 year timeframe beginning in 2005-06 (the earlier study had considered a 6 year timeframe commencing in 2006-07); and to
- compare strata insurance pricing across Northern Australia and other east coast centres and consider the reasonableness of any significant variation in pricing across geographic areas.
This report sets out the results of the investigation.