maglog

maglog

By Sam Pentecost, Contributor

The minister’s senior speechwriter stuck his head around my office door. “Got a minute?” “Probably not,” I said. “I’m writing the rationale for the next shot at the Religious Discrimination Act.”

“Good luck,” said the adviser, without a shred of sympathy. “He’s worn out the carpet on his side of the bed praying for that legislation.”

“Yes, well, the rationale…” I began, which he took for an invitation to step into my tiny office. “I’d like to ask you about the reinsurance scheme for northern Australia.”

I stopped typing. “Why? That’s done and dusted. The final details are being worked out right now with the insurance industry.”

“I know,” said the speechwriter. “But the minister is heading for Cairns and wants to mention it. What I need to know is why we’re doing this. That’s your role, and people tell me you’re really good at it.”

I smiled. It’s not often that the Senior Rationale Creation Officer’s skills are even noted, let alone praised. “So what about the reinsurance pool?” “Well, for starters, how does it work?” “You should ask your minister that.” “He says he’s too busy.” We both smiled a knowing smile. In politics “too busy” means “I don’t want to do/ comment on that”. I suggested the story of the northern Australia reinsurance pool would best be explained over a cup of coffee at Aussie’s.

Settled behind a couple of large flat whites (two spoonfuls of sugar for him) I told the speechwriter what I knew. Which I now realise wasn’t very much.

I explained that north Queensland is exposed to the risk of cyclones and flood damage to the point that premiums for property insurance have gone through the roof. “There was a time when the insurance industry seemed prepared to carry the cyclone risks, but not any more.

“So high premiums became an issue for people up there more than 10 years ago, and they’re rather important electorates for the Coalition.”

The speechwriter nodded. “That much I understand. There seems to be quite a bit of research about this.”

“You’re not wrong. Going way back to Tony Abbott’s prime ministership. Remember Tony? He got a very intelligent report that actually mentioned a reinsurance pool as an option, but it ended up in a pigeonhole somewhere. We’ve had more reports on this than we’ve had prime ministers.”

“Reports and inquiries are a great way of not having to make a decision,” said the speechwriter. “So the sudden flurry of activity in the past year was mainly about retaining the northern Australia seats at the election?”

“That’s a very cynical thing to say. We just acted on the overwhelming evidence that something needed to be done, and someone eventually looked at the first report again and realised a reinsurance pool would at least ensure the Government’s at the back of the line when it comes to paying out.”

The speechwriter frowned. “I see,” he lied. “And the reinsurance pool underlining the insurance companies’ policies will lower premiums.” “That’s the general idea.” “Enough to make insurance affordable again?”

I pulled out my trusty phone and looked up the file. “The Government says premium savings will be in the region of 46% on domestic home policies in the north, plus up to 58% savings on strata and up to 34% for small businesses. The PM says a pool will reduce premiums by more than $2.9 billion over 10 years.” The speechwriter sat back, impressed.

“Wow. That’s a great solution.”

I said nothing, and after a strained silence he leaned forward, looking over his shoulder to ensure we weren’t being overheard and said quietly: “Will it work?”

The poor, naïve fool. I sipped my coffee and replied just as quietly: “The Australian Competition and Consumer Commission examined the pool option and recommended against it. And the Financial Rights Legal Centre, who are also pretty slick, say the savings on premiums might only be 3%.”

“Ouch. So the modelling is really important to back this up.”

“Yes, but I doubt we’ll see that until after the election. I might be wrong, but…”

He leaned forward on his elbows, suddenly looking weary. “Any other associated issues I should be aware of before I write this speech?”

“Well, you could consider this. People all over Australia are exposed to similarly high levels of risk from bushfires and floods. Premiums on high-risk properties in the rest of the country are climbing. So why should their taxes be used to fund a scheme that only props up people in the north?”

The speechwriter looked up from his coffee, eyebrows twitching. He swore quietly – we were in Aussie’s, after all. “That has the potential to become a real grudge issue. What’s the solution?”

“Are you asking me what the real solution is, or the political solution?”

“Political, of course.”

“Maybe extend the pool concept to everywhere – the insurance companies might even like that. Or put together a comprehensive national risk mitigation scheme.

"Or just stay low and hope nobody notices. I really don't know. I'm not a politician.