REPORT RELEASE: ACIL's First Evaluation of the Cyclone and Cyclone-Related Flood Reinsurance Pool

The Australian Consumers Insurance Lobby Inc (ACIL) is pleased to announce the release of its first comprehensive evaluation report on the Cyclone and Cyclone-Related Flood Reinsurance Pool (the Pool), titled " Under the Lens: ACIL's First Evaluation of the Cyclone and Cyclone-Related Flood Reinsurance Pool".

ACIL's evaluation was less than commendable of the Pool, emphasising a "needs improvement" verdict. The observation that the Pool offers limited to no substantial savings for consumers underscores the urgency for proactive measures to enhance its effectiveness. ACIL calls on policymakers to stay the course and initiate necessary changes before the 2025 review to avoid missing opportunities for timely improvements.

Key concerns raised by ACIL in the report spotlight the inequity where Northern Communities shoulder the financial burden of cover for their southern counterparts. The necessity of a comprehensive review of the current modelling is underscored, highlighting the importance of accuracy and fairness in distributing the pool's benefits. ACIL also provided a less than flattering assessment of insurers' interactions with the Pool.

ACIL's report not only highlights challenges but also offers solutions. Recommendations on reducing premiums linked to cyclone cover are put forth. ACIL advocates for an expanded eligibility framework for the pool, a move that encompasses sectors such as marine insurance, which grapples with soaring premiums, high cyclone excesses, and gaps in coverage for cyclone events.

ACIL was in Canberra on 11th & 12th September to meet with Assistant Treasurer Stephen Jones and Joint Select Committee Members for Northern Australia, including, Hon Warren Entsch MP, Mr Luke Gosling OAM MP, Senator Dean Smith, and Mr Andrew Willcox MP.

"We are excited to share the results of our in-depth evaluation of the Cyclone Reinsurance Pool. This report underscores our dedication to ensuring an insurance landscape that truly serves the interests of consumers." states Tyrone Shandiman, Chairperson at ACIL. The discussions we had with the Assistant Treasurer and members of the Joint Select Committee for Northern Australia were receptive, and we expect they will yield tangible benefits for consumers."

This release marks a pivotal moment for the insurance sector in Northern Australia. It lays the foundation for inclusive, affordable, and efficient insurance protection, reinforcing a brighter future for communities across the region.

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ACIL's First Evaluation of the Cyclone Reinsurance Pool

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NIBA's Post-Quality of Advice Review Actions Scrutinised by ACIL

The Australian Consumers Insurance Lobby Inc. (ACIL) has conducted a comprehensive inquiry into the actions of the National Insurance Brokers Association (NIBA) following its decision to amend the Insurance Brokers Code of Conduct (the Code) in the wake of the Quality of Advice Review by ASIC.

Before the Quality of Advice Reviewcommenced, NIBA proactively introduced amendments to the Code,requiring the disclosure of remuneration details to both individuals and small businesses. However, after the review's conclusion, NIBA altered the disclosure requirements to revert back to the original definition to include only retail clients.

This sequence of events led ACIL to scrutinise whether NIBA used the Quality of Advice Review as a pretext to backtrack on prior commitments, thereby raising legitimate concerns about the association's ethical conduct throughout the review process.

ACIL engagedin constructive dialogueswith NIBA, who demonstrated transparency and cooperation. NIBA clarified that the Code's modification was driven by member feedback following its release. Regarding the timing, NIBA confirmed that the decision was made before the review concluded but was deferred to accommodate potential further changes based on the review's findings.

Key Findings by ACIL:

• It was prudent for NIBA to wait for the review's conclusion to finalise the Code.

• No evidence suggests that NIBA exploited the outcome of the Quality of Advice Review to weaken the Code's impact.

• The updated remuneration disclosure requirements in the 2022 Insurance Brokers Code of Practice, offer enhanced consumer benefits compared to the 2014 version.

• ACIL emphasises, however, that NIBA could improve its communication to mitigate misunderstandings. Ideally, NIBA should have clearly communicated its intent to amend the Code both at the time of the decision and during the review.

On the subject of disclosure, ACIL conveyed its support to NIBA for comprehensive remuneration disclosure for all clients, both retail and wholesale, during consultations. ACIL Chairperson Tyrone Shandiman stated, " If insurance commissions are an equitable method of compensation, why not prominently present this information within key documents in 20-point bold font, to all consumers, irrespective of their classification?”

ACIL acknowledges that the new Code brings about favourable outcomes for consumers, featuring clauses that enhance transparency, accountability, and ethical conduct.The Code's effectiveness ultimately depends on brokers actively promoting and implementing its provisions, whilealso holding themselves and their colleagues accountable for compliance.

Tourism Under Threat: North Australia to Endure Consequences Due to Marine Insurance Costs

The marine industry in northern Australia is raising the alarm over the dire consequences that skyrocketing insurance premiums are inflicting upon the region's vital tourism sector.

Last month, ACIL reported on alarming premium hikes within the marine industry, with some marinas witnessing a doubling of premiums during their recent renewal cycles. These exorbitant costs, combined with high excesses of up to $500,000, are burdening marinas and forcing them to allocate considerable resources in their budget to accommodate potential excess payments.

“Marine tourism serves as a cornerstone of Northern Australia's economy, supporting a range of activities, such as snorkelling, scuba diving, boat tours, whale watching, and fishing charters. However, the relentless rise in costs threatens the tourism industry's viability. The increase in operating expenses for marine businesses results in higher prices for tourism activities and services, making Northern Australia less attractive to potential tourists and impacting tourism numbers.” ACIL Chairperson Tyrone Shandiman said.

The implications of inaction extend far beyond those who bear the burden of premium payments. The escalating costs are trickling down to tourism businesses that depend on marinas and boat operators, putting an additional strain communities in northern Australia. The ongoing uncertainty and financial stress inflicted by high insurance prices discourages potential investors from considering Northern Australia as a destination for marine-tourism business

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Concerns in the Marine Industry is growing following the Federal Government's decision to exclude Marine Insurance from the Cyclone Reinsurance Pool, a move promised by the former LNP government and effective from 1 July 2023. The Australian Consumers Insurance Lobby Inc (ACIL) and Marina Industries Association are jointly sounding the alarm, highlighting the urgent need for action.

Proposed Solutions

In light of this urgent situation, the marine industry advocates for the following actions to mitigate the looming crisis:

• Urgent Inclusion in the Cyclone Reinsurance Pool: We call on the Federal Government to take immediate action by including Marine Insurance in the Cyclone Reinsurance Pool. This step is crucial in providing the necessary relief to marine businesses in Northern Australia, curbing the upward trajectory of insurance costs and safeguarding their financial well-being.

• Subsidising Premiums for Northern Australia Marine Businesses: Alternatively, should the Federal Government choose to await the 2025 review, we urge them to consider subsidizing insurance premiums for marine businesses in Northern Australia until the review's completion.

The marine industry in Northern Australia is at a crossroads, and the time to act is now. Failing to address the pressing issue of insurance affordability could have far-reaching consequences for the region's economy, employment, and tourism sector. The Federal Government must prioritize the well-being of Northern Australia's marine industry and take swift action to ensure its continued growth and success.