North Queensland strata property owners slugged with massive insurance premium increases

North Queensland strata property owners slugged with massive insurance premium increases
Zoe FieldingDecember 7, 2020

Owners of strata properties in North Queensland have been hit by insurance premium increases of up to 200% over the past five years and the industry is calling for action to alleviate the strain.

Strata Community Australia Queensland branch president Simon Barnard, who is also a principal of Hartley's Body Corporate Management, said skyrocketing strata insurance premiums were affecting owners’ corporations across North Queensland.

Barnard said under state laws, strata buildings must be insured to full replacement value.

“There’s no option to not insure or to self-insure and that put enormous pressure on owners and property values. In some cases the debts became worth more than the properties,” he said.

Between 2007 and 2012, strata premiums in North Queensland rose by around 200% as strata insurance underwriters realised they had previously under-priced their policies in the wake of Cyclone Yasi.

Barnard said there was currently no mechanism for insurers to use to differentiate risk between individual properties.

“If you’ve got a brand new building that’s cyclone rated next to an old one that’s not, they are currently paying the same insurance,” he said.

North Queensland presents a greater risk to insurers than other regions as it is more prone to severe weather events. An Australian Government Actuary study in 2012 found that strata insurers in the region spent $130 on claims, commissions and operating expenses for every $100 of premium they earned.

At present only two insurers – IAG and Suncorp – offer cover to new strata buildings in North Queensland. Other strata insurers have exited the North Queensland market, or limited their exposure by only offering renewals.

Barnard said more competition would help to lower premiums, as would measures to allow insurers to better assess the risks of individual strata properties.

The federal government released a discussion paper examining the high cost of home and strata title insurance in North Queensland on 9 May and is calling for submissions by 2 June.

Minister for Finance Mathias Cormann noted in the discussion paper that homeowners in North Queensland were paying premiums around two and a half times higher than Queenslanders who live in the state’s south.

The paper also noted that home contents insurance prices across Australia had risen at twice the rate of the consumer price index since 2009, while home buildings insurance prices had risen at six times CPI.

Properties in North Queensland were worst affected with average premiums for combined home and contents policies in that region around two and a half times those in Queensland’s southern cities.

Average premiums for home and contents insurance for a property with no or little flood risk for a sum insured of about $300,000 for building and $80,000 for contents could range from $3,000 to $6,000 a year.

Adding to the costs for owners’ corporations, the Queensland state government has recently lifted stamp duty on strata insurance products to 9% from 7.5%.

Zoe Fielding

I am a freelance journalist and editor with more than 15 years experience specialising in personal finance, property, financial services and financial technology. A skilled writer and researcher, I have extensive experience producing high quality content for corporate and media clients. I am used to working to tight deadlines and tailoring the pieces I produce to suit a variety of audiences and formats.

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