Strata insurance premiums surge in wake of Queensland natural disasters, giving investors financial grief

Strata insurance premiums surge in wake of Queensland natural disasters, giving investors financial grief
Larry SchlesingerDecember 8, 2020

As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.

 

Investors in coastal apartments are facing a massive hike in strata fees as a result of insurance firms pushing up premiums by as much as 800% since an escalation in natural disasters.

The situation has reached crisis levels, with the House of Representatives Standing Committee tasked with examining the performance of the insurance industry in the wake of the floods, extending its remit to include an investigation of residential strata insurance.

Committee chairman Graham Perrett says he has received evidence of massive increases in insurance premiums since Cyclone Yasi, including one example where premiums went from $14,500 in one year to being offered at $81,000 in the next year.

Andrew Hayes, who owns a three-bedroom unit in a complex of 18 apartments in Cairns North, says annual insurance payments for each unit holder would rise from $830 per unit to $2,906 as a result of Zurich Insurance pushing up annual strata premium by 350%.

Zurich Insurance has quoted an annual strata premium of $58,374 for the forthcoming year of compared with $14,948 charged in the previous year, The Australian reported.

Jo Anne Cracknell, who owns an apartment in Cardwell in Far North Queensland, says insurer CGU has pushed up annual premium by nearly 400% from $12,470 last year to $43,776 for the year ahead.

Similar dramatic price hikes have also been noted by the Unit Owners Association of Queensland.

Warren Entsch, MP for Leichhardt in Far North Queensland, who has driven a push on behalf of constituents facing significantly higher insurance bills, has welcomed the inquiry.

“This is an action that needed to happen and it needed to happen quickly. If this issue is not addressed by the next round of insurance premiums I have no doubt we will see people forced out of their homes,” Entsch says.

Assistant Treasurer Bill Shorten says a closer look into the insurance issues in Queensland has made him aware of the “increasingly serious issue now that many people are renewing their strata title insurance policies".

"In particular I've been concerned about the news coming out of cities and towns like Cairns, Townsville, Port Douglas and others in the region, where anecdotal evidence suggests residential strata insurance is becoming an increasing issue."

In its October 2011 fact sheet on residential strata insurance, the Insurance Council of Australia says premiums will continue to rise and “may seem expensive”.

However, it defended these increases by saying that when the premium is divided by the number of individual strata units involved it will “often be less than that paid by standalone households in the same area”.

This apparent lack of sympathy aside, the Insurance Council does acknowledge that “areas such as Far North Queensland have experienced significant premium increases in recent times and some insurers have adjusted their appetite for underwriting in these areas”.

The parliamentary inquiry will focus its investigation on northern Australia will include examining the magnitude of the increases in the cost of residential strata insurance over the past 5 years, “the reasons for these increases and whether these increases are likely to be sustained”.

It will also look at the extent to which “the nature of body corporate arrangements are contributing to affordability difficulties”.

It is expected hearings will start in late January with unit owners, body corporate managers and real estate agents encouraged to make submissions.

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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