05/04/2021 | Press release | Distributed by Public on 05/04/2021 04:03
THE HON. WARREN ENTSCH MP, MEMBER FOR LEICHHARDT: Look can I say, first of all, thanks everybody for being here today at the Cotton Club a very positive place to be. A great small family owned business here that has struggled for a long time under the burden of high insurance premiums (inaudible). So I think it's a great example of what we've been facing here in northern Australia for almost a decade. Great to have the Prime Minister here. Great to have our Minister Sukkar. And of course my good friend and colleague all the way up from Brownsville, sorry Townsville, Phil Thompson - sorry a bit of rivalry here. And to be able to be part of the announcement that has been a decade in the making. This is something that we have been asking for a long time, and that is a reinsurance pool. The challenge, of course, and the reasons it's taken so long is that we had to build a case to prove market failure for government intervene. And we've been able to do that. And thanks to Minister Sukkar and the Prime Minister who stepped up to this and made it happen. So I want to thank you, Prime Minister (inaudible).
PRIME MINISTER: Well thank you, Warren, and it's great to be here with you, and all the colleges who are with me. And Dom, thanks for having us here. It's great to be back here in Cairns. Living in northern Australia is unlike any other part of the country. And that brings challenges that the rest of the country don't face and that is particularly in relation to natural disasters. All too often have we see the devastation of these terrible events impact all the people of northern Queensland, tropical northern Queensland, but also right across the Top End, whether it is here or in the Territory, or over in Western Australia. And for some time now, we have been working and I've got to say, largely at Warren's great encouragement, to ensure that we address what has been a very big disadvantage for people living and running businesses here in northern Australia. Phil's understood that too, from the day he has come into the parliament and I'm sure beforehand, and I want to pay credit to Michael Sukkar, the Minister Assisting the Treasurer, who working with the Treasurer and I over the last couple of years, has been putting our head under the bonnet on this to make sure that we get the right solution. And that solution is a $10 billion dollar underwrite guarantee on the reinsurance pool for insurance here in northern Australia for the next decade. And what that means is that it reduces the risk to get more commercial insurance providers into this market. The number of providers has dwindled, particularly as each disaster hit and the few of them that were around, and the premiums just go higher and higher, and forcing people either into retirement or out of business and making life just that much harder for businesses as well as those in their own residencies. And so this decision, which is in next week's budget is ensuring that we can start turning that around. And we can see premiums fall and we can see more operators, more insurance companies coming into the northern Australia market, to get that competition back. That will ensure that people living and working, running their businesses here in northern Australia should get a fair deal and get the same sort of opportunities that people in the southern parts of the country can have.
Now, the other thing I'm really pleased about is we're not doing this by leaving every other insurance holder in the country. That's not what we're doing. And so what this is about is reducing the premiums for those in northern Australia, not increasing the premiums for others elsewhere in Australia. We are the party of lower taxes and the government lower taxes. And we're also the government dealing with increasing costs of living. And by doing what we're doing here today, I think addresses that issue, I think, fairly and squarely. There is also a significant investment and a new pilot program to mitigate risk in strata developments. And I'll ask Michael to speak more about that. What that really is about putting adaptations into buildings and premises that reduce the risk of damage, which, of course, in turn leads to a reduction in the insurance risk and also can lead to a reduction in premiums. Mitigating the effects of what's happening in our climate, mitigating the impacts of these disasters. It's all about resilience. We want people to be able to live in northern Australia. We want them to be able to run successful business in northern Australia and we want to boost their resilience and give them the tools they need to ensure that they can look after themselves, because they're a great pioneering, entrepreneurial community. We love this part of the world and they just want those same opportunities to be able to keep on doing what they're doing. So it's great to be here. I'm going to let Michael speak more to that. Phil's going to have a few words to say and then Dom's going to tell you what it means for his business.
THE HON. MICHAEL SUKKAR MP, ASSISTANT TREASURER: Well, PM, it's wonderful to be here and I want to thank Warren Entsch and everyone here for being here (inaudible). Phil and Warren had led the charge in relation to insurance issues in northern Australia. And as the PM said, today's announcement is quite monumental for everybody in northern Australia. A $10 billion dollar reinsurance pool will be operated by the Australian Reinsurance Pool Corporation, the existing entity that we operate in relation to terrorism risk will now take on cyclone risk as well. We've seen from around the world, whether it's in the UK or France or Japan reinsurance pools of this kind bring down premiums, improve accessibility and enhance [indistinct]. With respect to accessibility, the ACCC has seen more than 20 per cent of the buildings here in northern Australia are uninsured. We've also seen premiums skyrocketing over the last decade, as Warren Entsch has said. And in relation to today's announcements, I've already had two large national insurers say to me that they will be shortly announcing that they are re-entering the northern Australian market and now that they will be able to access reinsurance through the Australian government. The reinsurance pool will commence on the 1st July 2022. We will have a Treasury-led taskforce between now and then to work very closely with stakeholders, to keep working very closely with Warren and his community, to Phil Thompson and his community, and, of course, the insurance companies to make sure the reinsurance pool can maximise the benefits for everybody who lives in northern Australia.
As the PM said, we have an additional measure today, a significant announcement in its own site, which is in its own right, which is a strata reinsurance, a strata program to provide mitigation funding - $40 million over three years to assist owners of strata properties to fortify those strata properties against cyclone risk, whether it's retrofitting roofs, whether it's improving cladding, whether it's improving drainage. This funding will support strata sector, which has been disproportionately impacted by premium increases, so it will work hand-in-hand with the reinsurance pool to bring down premiums across the board, but to even enhance those premium reductions in those strata properties, because as a condition of that funding we have spoken to the Insurance Council, and where we can show that improvements to a particular strata property funded through this pilot are able to improve the insurance risk, their premiums will drop. So can I thank, again, Warren and Phil, and of course, the Prime Minister. The Prime Minister has backed northern Australia in, the whole way in relation to this $10 billion reinsurance pool. A significant announcement of its kind and we're really keen to work hard for the northern Australians now in delivering the reinsurance pool and making sure it brings down those premiums, improves accessibility and enhances competition.
PHIL THOMPSON OAM, MP, MEMBER FOR HERBERT: I won't be as good as that one, but what I want to start by saying is Warren, you're a bloody legend, mate. For the many decades that you've fought for this to get this across the line - thank you so much for continuing the fight. It's always good to have the Prime Minister in the north. He's a frequent flier to this region. I'd much prefer him to be in Townsville, but I suppose coming to Cairns is the next best thing. Minister Sukkar, once again, his leadership in this and really picking it up and taking it on board is just a credit to him at the level he is as a Minister.
What we've seen is market failure of an essential service - and the essential service is insurance. You need insurance to own a home, a business, a strata. It's as essential as having water and electricity. And when we saw the market fail in the north, we know we needed to act immediately. And with the leadership of Warren Entsch and my northern colleagues like Susan McDonald and other senators around and, of course, George Christensen, we formed a group, a group that will take up our message, what we live every day, with the community, having the voice like the business we're in now and to take to Canberra. Because our job is to listen, work and deliver. So we listened to the community on what we must do to improve the insurance failures. We go and we work in Canberra and then we bring the Minister and the Prime Minister up here to deliver it, because that's what the role of a Member of Parliaments is to do.
Now, this essential service that has failed will now be bolstered through a reinsurance pool. We've seen reports after reports after reports - you only just saw Warren Entsch show you table six of a report that was done in 2014. The time for reports has finished. The time for action is now. And that's why this reinsurance pool will bring a healthy competition into the market to take the burden away from the family businesses, the mum and dad businesses, the homeowners, the strata, everything like that because people don't deserve to be pushed out of the market because of market failure. And that's what the federal government has stepped in to do. Now today, I am going to call on the deputy - what's that - Miles, Miles ... that's right. He's too busy running his mouth down south and shredding stuff in shredders and talking a lot of garbage - the time for his talk is over as well. What I need the State Labor Government is to look at the different legislation with body corporate, and get rid of stamp duty. The federal government is doing a lot of the heavy lifting here and now we need the State Labor Government who is broke, and I know that they want to top their [inaudible] up on the hard work of mum and dad business, but to do their bit as well, because we are all in this together and the only thing that we need to be putting before all of ourselves is our communities and the businesses and the family homes and the stratas and everyone that has insurance because people need to be kept in the market, people need a road. And, you know, because they're the engine room of the economy. So, thank you PM. Thank you Sukkar. And of course, Entschy, really appreciate your hard work.
DOMINIC DAVIES, OWNER, THE COTTON CLUB: I'd like to thank the PM, and particularly Warren and Michael for working so hard to get this fund through what it means to our business and our team as a family run business in the north is that we can plan with certainty. It's not having to worry about the volatility that results from not many underwriters in the market and come insurance times you don't know what you're going to get. And so that transfers into certainty so we can reinvest in our business, and investments up here in the north, which is where we want to go, rather than mom and dad operators like ourselves having to sell out to larger corporations that have exposure across Australia and they can go well, if you take our northern risk, if you want the rest of our business. So it's really important to the moms and dads operators, which pretty much are a huge part that drive the Cairns economy. So it'll be welcomed across the board and it's great.
THE HON. WARREN ENTSCH MP, MEMBER FOR LEICHHARDT: I think we should we should wind it up here with the President of the Chamber.
SALLY MILKOTA, PRESIDENT, CAIRNS CHAMBER OF COMMERCE: Thank you Warren. Thank you Prime Minister. Look the Cairns Chamber of Commerce, we've been advocating for the reinsurance scheme for many, many years. And we've been working quite closely with the Townsville Chamber as well, because together, you know together our voices are louder. The thing is we're preaching we have been preaching to the converted with Warren Entsch. So he has been taking our cause, taking all the other businesses out there, their cause, to Canberra and it's so wonderful today that, you know, we can see a turnaround with hopefully COVID. And this is another positive story to give those business owners that have been struggling for the last 18 months, a small hope that the governments are listening. And more hope that there is support and some more hope for the future. So if they're really struggling business at the moment, we're saying to them insurance is going to come down soon. Hang in there, we're here to support you, we're here to listen to you. So thank you so much to this Government for bringing this forward. We're quite excited and I'm looking forward to sharing the news, obviously with our members and seeing how this will help impact their bottom line. Thank you.
PRIME MINISTER: I'd like to give a shout out also to Minister Price, the Member for Durack over in Western Australia and I was in Western Australia recently and touring in Kalbarri where the cyclone went through. Now that's a bit further south. But all through Kununurra, Karratha and all these places as well we saw it means just as much there as it means here. And Melissa Price from Western Australia, the Minister for Defence Industry has been doing also a very good job on highlighting these risks and while we were touring Kalbarri we had this exact conversation about this particular initiative so well done to you as well Mel. Ok happy to take some questions on some local issues, I would have done a national press conference today so Canberra can leave their text messages to you to another time and how about if we deal with some local questions.
JOURNALIST: What is the average level of saving homeowners and business owners can expect to make on their premium?
PRIME MINISTER: Look we would hope to see, you know, more than 10 per cent on this. And it really is a function of getting those additional players into the market. And I would hope for better than that. But it will take some time to achieve that. What, I think what Dom said was really important. This actually enables you to plan. Plan and to deal with your insurance brokers and other companies. And so, you know what the footing is going to be for the next decade, and I think for that uncertainty to be removed is a big deal, it's a very big factor. And so it's the combination of the certainty, the confidence and the reduced premiums that I would expect, that I think go together for the package. Michael, would you like to add anything to that?
THE HON. MICHAEL SUKKAR MP, ASSISTANT TREASURER: Yeah look in the end the premium reductions will be based on a number of factors. What we're very pleasantly surprised that just today, is the two national insurers have already indicated to us that they will now enter the market. So those sorts of things go to pushing the premiums even lower. It also insures against, pardon the pun, against ever rising premiums. As you've seen over recent years, each year you get home and you open the letterbox and you get that premium that's gone up quite significantly from the year before. This insures against that and provides that stability. So, yes, it will deliver undoubtedly premium reductions immediately, but will also insure against those premiums increasing in the future.
JOURNALIST: You mentioned under insurance, Minister. Will this rule that out or just improve the situation?
THE HON. MICHAEL SUKKAR MP, ASSISTANT TREASURER: Well we'd expect it to improve the situation. The ACCC report found that in northern Australia 20 per cent of properties are not insured at all. So that doesn't include under insurance, 20 per cent are not insured at all. And when you look at the national average it's 11 per cent. So it's nearly double the national average. Again with new players entering the market with the improved premium costs, I think we would all expect that would return somewhere towards the national average but it'll certainly be moving in the right direction.
PRIME MINISTER: The other part, Phil's right to say, the other part is the stamp duty on these premiums as well. There's a fair bit of gouging going on. And this is something I think state and federal need to work together on. We're stumping up on a massive underwriting of this and guarantee. $10 billion is a big commitment from the Commonwealth. And so we would encourage them to do that. You talk about the strata work you're doing, Michael, but the obligation on states and, indeed, local authorities, to ensure that they get their planning arrangements right, that we're building in the right places, that there's the appropriate building certification that's going on, all of that builds resilience. The north, that has just been getting stronger and stronger, I think, Warren over a long period of time. And as we saw over in the west in Kalbarri what can happen when you don't have homes built to that strength, when you don't have homes built to cyclone strength. To be fair to those people in Kalbarri, that's not where they would normally see a cyclone of that nature. You know we all have a role to play to make the north more resilient, what we're doing today is doing our part.
THE HON. WARREN ENTSCH MP, MEMBER FOR LEICHHARDT: And of course, the amendments to the Queensland strata legislation, the compulsion at the moment to insure for full replacement value, if they were to amend that and put the option of full replacement or full market value, could see very, very significant reductions in costs as well. So there is a requirement there or for the state government to step up now and to start to look at this strata legislation as well as getting rid of 12 per cent on stamp duty on renewables.
JOURNALIST: (inaudible) here have been talk of generating savings of up to 50%. Do you see that as a real possibility?
PRIME MINISTER: We're not making that claim, I should stress. We're putting this in place. We're quite conservative in the way we predict these things. But I would hope to see at least a 10 per cent fall, and better. I would hope to over-perform on all of those things. Michael has a confident smile there, which I think's great. There is no exact science about this. But what you've got to do? You have to have a reinsurance pool which gets other operators into the place which is going to happen. That's the change we see happen. We're seeing that response.
JOURNALIST: When can residents and locals expect to see results of this pool, money in their pockets?
PRIME MINISTER: Well it the starts from 1 July 2022 and so we expect to see things start to change at that point. Now the other part of this as Dominic said, once you put this arrangement in place and people know it's coming. The insurance companies know it's coming, then that changes their risk almost immediate and so they can start pricing this into their future policies. So making the change, they're making the announcement now, making it really clear that the Commonwealth government is standing there with a ten billion dollar guarantee for and reinsurance pool that is the game changer.
JOURNALIST: Prime Minister, when you met with Lex Greensill in 2019, can you tell us what you discussed, whether that meeting was organised by Julie Bishop?
PRIME MINISTER: (inaudible) I must say, I don't think that meeting resulted in anything of memory or note.
JOURNALIST: Just back on insurance, sorry, Prime Minister, Labor insists you've been dragged kicking and screaming to this point. They want more detail about how will actually work. Is it just increasing competition that will guarantee those lower prices?
PRIME MINISTER: I don't feel the need to respond to the Labor Party about making political commentary on this. We're simply taking action. We're getting stuff done. That's what it's about. And that's welcomed by the community here and right across northern Australia. I didn't notice anyone other than our great local members here, particularly lead by Warren leading this charge. He's been the one (inaudible) determined because he has been right. And over the period of time, as we've seen the situation change I think it became very clear a couple of years ago now and the Treasurer and I have been determined to get moving. I spoke to the assistant treasurer, and here we are today. There's a distance to travel still on the technical details that we need to put in place. These are not simple things. This is a $10 billion dollar guarantees to a reinsurance pool. It is not a small thing. It requires careful analysis and consideration, and that's what will responsibly be done.
JOURNALIST: What geographical area is covered by this scheme?
THE HON. MICHAEL SUKKAR MP, ASSISTANT TREASURER: The area will be the north of the tropic of Capricorn and really all of northern Australia. It will cover north Queensland, the northern Territory and northern WA.
PRIME MINISTER: Anyway, it's great to be here Dom, thank you very much and well done Warren, good job Entschy.