Email from Lisa Harrison, Executive General Manager, Customer Product & Pricing Personal Insurance | Suncorp Group Please be assured that we (Suncorp) are aware of the affordability pressures some in the community are facing. Focusing entirely on the quantum amount of premiums and quotes can be misleading and blurs the true picture of the cost impact across the entire building of occupants. Average premium costs per unit for Vero policies in north Queensland locations, for instance are below average premiums for home. Early sales data for Suncorp’s new direct strata product indicate much lower costs per unit. I’m not trying to brush your concerns aside, but I think it’s important that we have discussions grounded in comprehensive investigations that have taken place recently. As we discussed last week, strata pricing in north Queensland has been the subject of two reviews by the Government actuary. The Actuary concluded in his second report: “In my judgement, most of the price variation (between NQ and the east coast capitals) can be attributed to the relatively lower risk in the east coast centres, compared with NQ. Specifically, these other centres are not exposed to cyclone risk in the same way as NQ. As a result, claims costs in NQ are expected to be both much higher and more volatile than those in other east coast centres.” (SECOND REPORT ON STRATA TITLE INSURANCE PRICE RISES IN NORTH QUEENSLAND, 2014 page 24) For the insurers still operating in north Queensland, prices needed to better reflect the cyclone risk that is inherent in the region. Notwithstanding this fact, I believe Suncorp has taken an industry lead in addressing these pressures. For strata specifically: • More than 200 policyholders have purchased our direct strata product since it launched in April. I expect this number to grow through the year as body corporates and owners reach the end of their existing 12-month policies. • Some Build to Last measures will directly benefit strata dwellings, particularly those that strengthen and protect openings i.e. doors and windows. Suncorp has committed to rewarding those measures that make homes/strata dwellings more resilient to cyclone risk with reduced premiums. • Suncorp is seeking advice from Government about when engineering assessments of strata title properties will take place in north Queensland as provided for in last year’s Federal Budget. We believe this is a very worthwhile initiative for the industry. (I too am trying to find where the $12.5M has gone). In addition, I have reflected on concerns you shared with us about Suncorp’s own strata brands particularly their reported limitations relating to properties above $5 million sum insured. I have sought discussions with our Commercial Insurance business to determine what, if any, action we as a Group can take to address this particular segment of the strata market. Suncorp remains committed to working with Governments and communities to address these issues together. The risk issues in north Queensland are long standing and significant and it will only be through meaningful collaboration we can begin to see positive outcomes for the number of cases you’ve referred to in north Queensland. MY COMMENTS: I thought you may be interested in the conclusions of the Institute of Actuaries on the insurance crisis, in the Actuaries Institute’s response to the Productivity Commission’s Issues Paper on Natural Disaster Funding Arrangements (‘discussion paper’) released for consultation in May 2014. “Insurance is becoming unaffordable for some parts of the community, especially those living in areas at high risk of natural perils such as flood and cyclone and to a lesser extent bushfire. The following chart shows that the cost of building insurance premiums for 320,000 households (or 4% of total households in Australia) is estimated to exceed three weeks of average earnings.” They note that 49% of properties have insurance premiums consisting of less than one week’s average earnings. Also, in the Pivot North Report, tabled in the Federal Parliament late last year (2014), Allianz Australia were quoted as follows : "Allianz Australia highlighted the weather risk component of insurance costs in North Queensland, particularly relating to floods and/or cyclones, stating that ‘average premiums between North Queensland and elsewhere involving multiples of 2.5 times reasonably reflect differences in risk’. Allianz Australia noted, however, that ‘this conclusion becomes harder to sustain in light of evidence that some homeowners face premiums of ten or fifteen times those of other Australians’, and that ‘at such extreme levels, premiums cease to act as an appropriate price signal’. " I would like to be paying 2.5 times SE Qld premiums, but I'm not.