ACIL Calls for Federal Action: Leveraging Cyclone Reinsurance Pool Surplus to Reduce Insurance Premiums for Northern Australia Residents

The Australian Consumers Insurance Lobby (ACIL) has recently made a submission to the Federal Government Pre-Budget Consultation, urging the reinvestment of surplus funds from the Cyclone Reinsurance Pool into initiatives that reduce insurance premiums and strengthen resilience for Northern Australia residents. With some of the highest insurance premiums in the country, Northern Australians face significant financial challenges, exacerbated by cyclone risks and the associated cost disparities.

Click here to view ACIL's submission:

Federal Budget Submission (Final) - Affordable Insurance for Northern Australia

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"The growth of reserves within the Cyclone Reinsurance Pool provides a critical opportunity for the Federal Government to reinvest in high-risk communities," said Tyrone Shandiman, Chairperson of ACIL. "When reserve levels reach sustainable thresholds, surplus funds should be directed toward reducing premiums and funding resilience initiatives. The end of the cyclone season on April 30th will be an opportune time for the government to reflect on whether its surplus position enables the launch of such a program."

Premium Disparities and the Need for Action

Insurance premiums in Northern Australia are 2-3 times higher on average than in lower-risk areas, with the most extreme cases reaching 8-10 times higher. These inflated costs disproportionately impact residents and businesses in cyclone-prone regions, creating significant affordability and underinsurance challenges.

The Cyclone Reinsurance Pool was designed to address these disparities, but its growing reserves present an opportunity to go further. Ensuring that surplus funds are strategically reinvested will provide direct relief to residents while supporting long-term resilience.

ACIL is calling on the Federal Government to:

1. Leverage Growing Reserves: Once the Cyclone Reinsurance Pool’s reserves reach sufficient levels to sustainably cover claims, surplus funds should be used to reduce premiums and invest in community resilience initiatives.

2. Achieve Regional Premium Reductions: Work with the Australian Reinsurance Pool Corporation (ARPC) to implement premium reductions across Northern Australia, targeting areas where the risk has been mitigated through resilience investments.

3. Fund Resilience Initiatives: Use surplus funds to support resilience measures such as roof strengthening, debris management, and securing outdoor structures, ensuring high-risk areas are better prepared for cyclone events.

   
   

Ensuring a Fairer Outcome for Northern Australia

ACIL’s proposal highlights the dual benefits of surplus reinvestment: reducing premiums for high-risk communities and building stronger, more resilient infrastructure. This approach ensures the Cyclone Reinsurance Pool delivers on its mandate to provide equity and relief for Northern Australians, who contribute significantly through their high premiums.

"Reinvesting surplus funds, particularly as reserves grow, is essential to deliver both premium reductions and meaningful resilience improvements for Northern Australia," Shandiman said. "The Federal Government must use the conclusion of the cyclone season as a moment to evaluate its financial position and take decisive steps toward implementing this much-needed program."

ACIL Discusses Concerns with ASIC on Insurance Code Review, Warns Against Inadequate Endorsement

The Australian Consumers Insurance Lobby Inc. (ACIL) has recently engaged with the Australian Securities and Investments Commission (ASIC) to voice significant concerns about the recently released General Insurance Code of Practice Independent Review Initial Report, as well as the Use of Expert Reports Industry Best Practice Standard. The meeting focused on highlighting gaps in the proposals that ACIL believes fail to adequately address critical consumer issues associated with expert reports in insurance claims processes.

The Flood Failure to Future Fairness report (click here) from the House of Representatives strongly reinforces the concerns ACIL has been raising, particularly regarding the inadequate standards governing expert reports in insurance claims. The report outlines systemic problems like inconsistent expert reports, poor communication, and delays in claims resolution—issues that closely align with ACIL’s advocacy. Both the report and ACIL emphasise the urgent need to revise the General Insurance Code of Practice to better protect consumers from the negative impact of flawed reports and unfair claims handling processes. ACIL applauds the strong recommendations put forward by the House of Representatives, particularly the call for heightened regulatory oversight and improved accountability standards for expert reports. The report echoes ACIL’s long-standing argument that the current proposals for expert reports fail to address the core issues faced by consumers, and that further reforms are necessary.

ACIL Chairperson, Tyrone Shandiman, remarked, "When we spoke to ASIC, we made it clear that the proposed standards simply do not go far enough to address the significant consumer issues related to expert reports. The current proposals guide only how insurers should use expert reports but don't deal with the source of the problem—the expert reports themselves. Insurers are not experts; how are they to know what appropriate evidence or investigation methods are, or what the building codes are?"

Shandiman referenced the findings of the General Insurance Code Governance Committee's Thematic Inquiry into Making Better Claims Decisions, which "found the quality of reports prepared by experts engaged by subscribers to be poor," adding, "We saw too many reports that failed to provide a clear and demonstrable link between the cause of damage and the loss. We did not always see sufficient evidence to justify the assessments."

ACIL's Key Requirements for Code Revisions

ACIL is advocating for updates to Section 5 of the Code to impose greater standards directly on experts, rather than relying solely on insurer oversight. " We have seen far too many cases where a single sentence, or even a single word in an expert's report, becomes the basis for an unfair denial—leaving consumers in financial ruin, stripping away their livelihoods, destabilising families, and causing severe mental health struggles," said Shandiman. "The stakes are too high to allow such carelessness. The devastating consequences of an erroneous expert report demand that both experts and insurers uphold far stricter standards to truly safeguard consumers."

ACIL also noted that the Insurance Council of Australia (ICA) is seeking ASIC’s sign-off on the revised Code of Practice. Shandiman warned, "It would be detrimental for consumers if ASIC endorsed a code that does not properly address the well-publicised issues surrounding expert reports. An endorsement of this kind could potentially leave significant gaps in consumer protection, perpetuating existing challenges in claims management."

Call for Action

ACIL is urging the ICA to address these issues within the revised Code of Practice to ensure a fairer process for insurance consumers. "ASIC's prior statements indicate that the regulator is closely monitoring claims handling practices in the industry, making it essential for the ICA to take these concerns seriously and ensure consumers are not left disadvantaged by the gaps in oversight," Shandiman added. ACIL remains committed to advocating for stronger consumer protections and will continue to advocate regulatory bodies like ASIC & ACCC to push for the necessary changes.

Further Analysis

ACIL has expressed the following concerns to the Insurance Council of Australia (ICA). While ICA believes their Use of Expert Reports Industry Best Practice Standard addresses our issues with expert reports, we emphasise that the standard only governs how insurers use these reports, not the root of the problem—the expert reports themselves. The specific concerns are outlined further below.

Standards for Service Suppliers

ACIL is concerned that the current proposals do not impose sufficient obligations on service suppliers to:

• Provide adequate evidence to substantiate their conclusions, ensuring that their opinions are well-supported and verifiable.

• Accurately cite and apply relevant building codes, standards, and regulations to each case.

• Consider previously certified performance solutions when reporting on defects.

• Conduct thorough and comprehensive investigations relevant to the issues they are assessing. This includes undertaking additional investigations where necessary to ensure accuracy, particularly in complex cases.

• Clearly state when findings are inconclusive, avoiding a bias toward conclusions that favour the insurer, such as exclusively identifying excluded causes of damage.

ACIL believes that Part 5 of the Code should be updated to include these standards for anyone providing expert opinions, allowing the Code Governance Committee to have oversight of experts as well.

Standards for Insurers

Furthermore, the current proposals do not address the concerns ACIL raised with in our recent meeting regarding insurer practices, including:

• Directive Guidance: Instructions that may unduly influence expert opinions.

• Vendor Contracts: Performance measures that incentivise the denial or reduction of claims, along with potential conflicts of interest or contractual terms that contradict the Code or Best Practice Standards. This can include instances where a contract requires a contractor to prioritise the insurer’s interests or prohibits them from making critical statements, it could compromise their ability to provide an impartial and objective report.

Process for Disputing Expert Reports

ACIL is also concerned about the financial burden on consumers who wish to dispute expert opinions. The current process often requires consumers to pay for alternative experts to challenge findings, creating a power imbalance. Many consumers are unable or unwilling to risk incurring significant costs to dispute a report, leaving them disadvantaged. ACIL believes that consumers should have the right to dispute an expert's findings at the insurer's expense—this would create greater accountability for experts to provide fair and unbiased opinions.

ACIL Calls for Urgent Action and Investigations into Strata Insurance Services Practices

The Australian Consumers Insurance Lobby (ACIL) has called for immediate investigations and regulatory interventions into the business practices of Strata Insurance Services following a recent high-profile ABC report, which exposed alleged significant conflicts of interest between Strata Insurance Services and strata manager NetStrata. The report revealed allegations that Strata Insurance Services has been charging fees as high as 148% of the insurance premium, far exceeding the industry standard of 20%-25%, raising serious concerns about consumer exploitation.

In response, ACIL has taken the following steps:

• ASIC & ACCC Investigations: ACIL has formally written to the Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) requesting thorough investigations into whether Strata Insurance Services’ remuneration practices violate Australian Financial Services Licensing obligations. ACIL has raised concerns about whether these practices potentially contravene requirements to provide efficient, honest, and fair financial services, as well as potentially breaching other Australian Law.

• Insurance Brokers Code Compliance Committee (IBCCC) Investigation: ACIL has also engaged with the Insurance Brokers Code Compliance Committee, requesting an investigation into whether Strata Insurance Services has breached its obligations under the Insurance Brokers Code of Practice.

• Engagement with NIBA: ACIL is actively engaging with the National Insurance Brokers Association (NIBA) to push for industry-wide changes to its Code of Practice, addressing concerns raised by ACIL regarding transparency and fair treatment of consumers in the insurance broking industry. ACIL is advocating for the following key reforms:

  • Ensuring brokers using non-standard remuneration models demonstrate that their fees provide meaningful benefits to consumers.

  • Requiring brokers to verify valid instructions from the insured to avoid unlawful appointments by strata managers.

  • Strengthening conflict of interest provisions by prohibiting remuneration practices that create unmanageable conflicts of interest and provide clearer guidance on identifying, disclosing, and managing these conflicts, ensuring brokers uphold their duty to clients.

  • Prioritising consumer interests, and the Code to prohibit remuneration models that unfairly shift costs onto consumers, creating conflicts that undermine fairness.

ACIL’s Commitment to Reform

Tyrone Shandiman, Chairperson of ACIL, stated: “The allegations in this report are deeply troubling especially when the excessive fees and remuneration practices are described in the ABC report as a ‘betrayal of trust,’ ‘jaw-dropping,’ and ‘ripping us off.’ ACIL is taking strong steps to engage with ASIC, ACCC, IBCCC, and NIBA to ensure these practices are thoroughly investigated, and to advocate for stronger consumer protections in the industry. Our priority is to ensure transparency and fairness for consumers in the strata insurance market.”

ACIL will continue to advocate for revisions to the NIBA Code of Practice to ensure that the broking industry operates under clear and fair standards that protect consumers from unethical practices.