Insurance boss calls for under-priced strata to be ‘corrected’

Insurance boss calls for under-priced strata to be ‘corrected’

Insurance boss calls for under-priced strata to be ‘corrected’ An insurance boss has called for the industry to correct the inadequate pricing on catastrophe exposure for residential strata.

Peter Jones, head of SME underwriting with Zurich Australian Insurance, warned if residential strata continue to be under-priced, it will have a significant impact on the market around availability and affordability.

Jones said under-pricing is particularly an issue on the east coast where premiums are “unsustainably low”.

He said all insurers are under-pricing catastrophe exposure for residential strata and that almost all of the residential strata insurance is underwritten via underwriting agencies backed by local insurers.

Being a step removed from the insurers’ usual underwriting and pricing practices may have resulted in less scrutiny on actuarially-based pricing and underwriting governance, Jones said.

“Underwriting governance, actuarial pricing and catastrophe exposure management is crucial to achieving long-term sustainable profitability for any portfolio of business.”

While exposure to cyclone risk accounts for much of the increased North Queensland residential strata premiums, Jones said climate change is resulting in more severe weather events generally, which are causing more damage.

“We believe we should be looking at a more sustainable solution for pricing residential strata than the short-term ‘match the market’.”
 
 
 
4 Comments
  • John Eden 20/10/2014 1:46:43 PM
    Pricing on Strata-What rubbish. Premiums on our strata units in Mackay have gone from $30,000 to $110,000 which is unsustainable. I would suggest that this is more than individual households pay. Secondly risk should be attached to the construction date and cyclone rating which it is not. Some strata units ie high rise are not in flood areas and even if there was a storm surge would probably only go through carparks. I would suggest that buildings should be individually rated and premiums adjusted - not the blanket policy applied by over zealous insurers!
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  • Robert Cooper 20/10/2014 2:12:27 PM
    Premiums may be underrated on the East Coast of NSW but certainly not anymore in Queensland, and definitely not in North Queensland. The more severe weather will affect risks all over Australia, but it is up to insurers whether they want to play in that space or not and how competitive they want to be. It is really competition keeping the prices down. For North Queensland they have less markets to access, so the price has gone up considerably. Many would not see these prices as being underrated.
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  • Kristy 20/10/2014 2:46:33 PM
    Is this man in the same country as me? I have watched strata premiums increase by 200% every year for the last 4 years. Why is the insurer now making this the insured's issue when they were the ones under pricing themselves and making the strata market more appealing to the home buyers. They have no-one to blame but themselves and need to realise that we are now in a market that is now in full swing of the GFC. Insurer's need to start realising that they are no longer the only ones who are penny pinching. Gone are the days $30mil + profit per year. Start playing the game like all other markets and stop being so selfish.
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