New economic analysis released today finds that the Tasmanian Government's proposed state-owned insurer TasInsure would not address the underlying drivers of insurance costs and would expose Tasmanian taxpayers to significant financial losses.
Independent analysis by Lateral Economics undertaken for the Insurance Council of Australia (ICA) has found that the proposed TasInsure scheme would require establishment costs of $150 million and prudential capital requirements of up to $510 million, and run annual operating deficits of up to $13 million.
Its operating deficits would exhaust the Motor Accidents Insurance Board's available reserves within 15 years, requiring taxpayer-funded top-ups.
Welcoming the Tasmanian Government's focus on insurance affordability, the Insurance Council has outlined alternative solutions that would deliver greater benefits while minimising taxpayers exposure to financial risk.
- Tax reform that puts money back in pockets: Reform the $260 million in annual state insurance taxes, which add 21 per cent to household premiums and up to 48 per cent for businesses.
- Strategic resilience investment: Partner with the Federal Government on flood and bushfire mitigation projects through the $1 billion Disaster Ready Fund, focusing on high-risk communities.
- Modernise outdated laws: Undertake a comprehensive review of civil liability settings to improve insurance affordability for small business, not-for-profits and community groups.
Current insurance affordability challenges are being driven by escalating extreme weather and persistent, high inflation, particularly in the building and construction sector, with more properties needing rebuilding more often and at a higher cost than ever before.
Ninety-eight per cent of Tasmania is bushfire-prone and property values represent 278 per cent of state output, which is the highest ratio in Australia.
This gives Tasmania a uniquely high property risk profile and underlines the need for evidence-based solutions that put downward pressure on the drivers of insurance costs without transferring risk from a well-functioning private market onto Tasmanian taxpayers.
Insurers are committed to working with the Government to implement solutions that address the underlying drivers of insurance costs.
Quotes attributable to ICA CEO Andrew Hall:
The question isn't whether action is needed, it's about finding the most effective solutions that will genuinely help Tasmanians over the long term.
The Launceston flood levee is proof that resilience works - it prevented $216 million in losses during the 2016 floods and generates annual premium savings of up to $14 million.
This is why we need solutions that reduce risk, not just transfer it.
The Lateral Economics analysis shows TasInsure would expose taxpayers to losses exceeding hundreds of millions of dollars, while doing nothing to address the underlying risk.
Instead, let's invest in resilience that delivers ten-fold returns, remove unfair state taxes, and modernise laws that are costing small businesses.
The insurance industry is ready to work constructively with the Government and community on solutions that will genuinely help Tasmanian families and businesses afford insurance over the long term.
