A recent economic analysis has found that the Tasmanian Government’s proposed state-owned insurer, TasInsure, may not effectively address the state’s insurance affordability concerns. Conducted by Lateral Economics for the Insurance Council of Australia (ICA), the analysis indicates that TasInsure could lead to significant financial liabilities for Tasmanian taxpayers.
The proposed establishment of TasInsure would incur initial costs of approximately $150 million and require prudential capital of up to $510 million. Moreover, the scheme is projected to run annual operating deficits of up to $13 million, which could deplete the Motor Accidents Insurance Board’s reserves within 15 years. This scenario would necessitate taxpayer-funded bailouts to cover the losses.
Concerns Over Financial Viability
While the ICA acknowledges the Tasmanian Government’s commitment to enhancing insurance affordability, it emphasizes the need for alternative strategies that would minimize financial risks to taxpayers. Current challenges in insurance affordability are largely attributed to increasing extreme weather events and ongoing inflation, particularly affecting the building and construction sectors. With 98% of Tasmania classified as bushfire-prone, the state faces unique property risks, further exacerbated by property values that amount to 278% of the state’s output, the highest ratio in Australia.
According 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.” He pointed to the Launceston flood levee as a successful example of resilience. This infrastructure project reportedly prevented $216 million in losses during the 2016 floods and generates annual savings of up to $14 million in insurance premiums.
Call for Evidence-Based Solutions
The analysis from Lateral Economics suggests that TasInsure could expose taxpayers to potential losses exceeding hundreds of millions of dollars without addressing the core risk factors. Instead, the ICA advocates for investments in resilience measures that could yield substantial returns. Hall stated, “We need solutions that reduce risk, not just transfer it. Let’s invest in resilience that delivers ten-fold returns, remove unfair state taxes, and modernize laws that are costing small businesses.”
The insurance industry remains prepared to collaborate with the Tasmanian Government and the community to find solutions that will genuinely assist families and businesses in affording insurance in the long term. As Tasmania navigates its unique insurance landscape, the focus on sustainable and effective measures will be crucial to ensuring financial stability for its residents.
