The Australian Competition and Consumer Commission (ACCC) has reported that the federal government’s cyclone reinsurance pool is beginning to deliver on its objective of reducing insurance premiums for customers in cyclone-exposed regions.
The findings, published in the ACCC’s fourth insurance monitoring report, indicated that policyholders in medium-to-high cyclone risk areas are seeing lower premiums compared to previous years.
The report is the first to reflect the participation of all eligible insurers in the pool, which began operating in 2022.
ACCC commissioner Peter Crone stated that the pool is achieving its primary goal of reducing premiums for those most exposed to cyclone risk.
However, he noted that affordability remains a significant concern for many policyholders, particularly in northern Australia.
According to the ACCC’s data, the average home and contents insurance premium in medium-to-high cyclone risk areas has declined by 11% per $100,000 sum insured since the pool’s introduction.
In contrast, premiums for properties with low or no cyclone risk have increased by 4% and 7%, respectively.
The most significant reductions have occurred in coastal communities such as Mackay, Cairns, and Townsville, where median premiums dropped by about 15%. Karratha also saw a 9% decrease.
Small business customers in cyclone-prone regions have experienced even greater relief, with average premiums falling by 24%.
Strata insurance premiums in these areas have also declined, though to a lesser extent, with a 7% average reduction.
Notably, some locations such as Townsville and Karratha recorded strata premium decreases of 28% and 23%, respectively.
Despite these improvements, the ACCC found that insurance costs remain elevated across much of northern Australia.
Average home and contents premiums now exceed $3,000 annually in north Queensland and the Northern Territory and surpass $4,600 in north Western Australia.
Strata insurance costs are particularly high, with average premiums in north Western Australia rising by 18% to over $18,000 per policy.
The report also highlighted that, while the pool was intended to encourage insurers to expand their presence in cyclone-affected regions, there has been little change in market participation.
No new insurers have entered the northern Australian market since the pool’s launch, and only minor adjustments have been made to underwriting controls and exposure limits.
One of the pool’s intended outcomes was to encourage private risk mitigation, yet the ACCC observed limited progress in this area.
Most insurers have frameworks to recognise mitigation efforts, but communication and incentives for policyholders remain minimal.
The Australian Consumers Insurance Lobby (ACIL) welcomed the report’s findings, noting that the pool is helping to narrow the premium gap between northern and southern Australia.
However, ACIL chairperson Tyrone Shandiman emphasised that further reforms are needed to address persistent affordability challenges.
“The gap is beginning to narrow – but more must be done to deliver fair and affordable premiums for Australians in disaster-prone regions. We cannot accept the current gap – over 100% – as the new normal,” he said.
ACIL is advocating for the upcoming review of the pool to consider additional measures, including government-supported mitigation programs, a review of regional premium equity, expanded eligibility for more property types, and coverage for other natural perils such as flood and bushfire.
“We applaud the progress – but we cannot rest,” Shandiman said. “We need bold action to close the affordability gap, support our most vulnerable communities, and ensure that every Australian has access to fair and affordable insurance.”
The ACCC’s report comes amid broader concerns about climate risk, with recent analysis from Climate Valuation and The Climate Council estimating that over 650,000 properties nationwide are already at high risk from climate-related hazards.
Another 1.55 million properties are considered moderately at risk, suggesting that insurance affordability will remain a pressing issue.
