Australian insurers say Tasmanian Liberals' state-run insurer plan is a "huge financial risk"

By Henry Gale

July 4 - (The Insurer) - The Insurance Council of Australia (ICA) has criticised plans announced this week by Tasmania's governing Liberal Party to establish a state-owned insurer if it wins the upcoming state election.

The ICA said the proposal "would transfer risk from a functioning private market onto the public purse, exposing Tasmanians to the cost of recovering from significant extreme weather."

State premier Jeremy Rockliff, who is leader of the Tasmanian Liberals, said in a statement that insurance premiums had increased by more than 35% over the last two years, forcing families to under-insure or not insure at all. A state-run insurer would lower households' insurance costs "by around $250 per year," he said.

"This is all about bringing the cost of living down for Tasmanian families," he said. The proposed insurer would initially offer home and contents coverage, regional insurance and policies for small businesses, community groups and events.

However, Josh Willie, shadow treasurer from the opposition Tasmanian Labor Party, said a state-run insurer would be "a huge financial risk" and called on Rockliff to explain how it would lower premiums without running at a "massive loss".

The ICA said the next Tasmanian government could improve the affordability of insurance by abolishing stamp duty and the fire services levy on insurance products and investing in risk reduction to better protect properties from extreme weather.

"Overseas examples show that taking risk on to the public balance sheet is a bad idea, particularly when that risk is expected to grow as a result of climate change," said Mathew Jones, ICA's general manager for public affairs, adding that government and industry needed to work together to address the issues.

Australia's ABC News reported that the policy was welcomed by the chief executives of the Tasmanian Chamber of Commerce and Industry and the Tasmanian Hospitality Association, who both described high insurance costs in the state as a "market failure".

Tasmania previously had a state-owned insurer, the Tasmanian Government Insurance Office, established by a 1919 law. It was sold under a Liberal state government in 1993.