Insurance pain hits Far North after cyclone and floods double whammy

Insurance pain hits Far North after cyclone and floods double whammy

PROPERTY owners and investors in the Far North are facing insurance cost rises of thousands of dollars as the full impact of cyclone Yasi and natural disasters hits home.

High vacancies, insurance premium increases of up to 300 per cent, and a lack of competition in the body corporate insurance market could make investing in the city undesirable, one property manager warns.

Homeowners also were bracing for insurance price rises of 10 per cent and more as worldwide natural disasters shake up the industry.

Property Ladder Realty director Linda Tuck gave the example of one Cairns apartment block of 39 units where body corporate insurance premiums were $12,882 last year.

This year, the renewal with Zurich was $48,730 and two cheaper options of $24,792 with CGU or $25,784 with AMP.

“This will make investing in Cairns undesirable and could lead to a further drop in property values. We have already seen drops of between 10 to 40 per cent on some properties,” Ms Tuck said.

REIQ chairman Cairns Rick Szelpuk said steep rises were likely to put pressure on rental prices on the thousands of units and apartments in the Far North.

“I think hikes in body corporate fees and insurance will mean landlords will try to get the money back from somewhere and it will have to be from the rental pool,” Mr Szelpuk said.

Springfield body corporate chairman Don Cunningham said the insurance on their 12 units at Springfield Crescent, Manoora, went from $3500 last year to $15,000.

“The same insurance company put it up astronomically and we hadn’t even put in a claim,” he said.

“We managed to find another insurance company who is charging us $5500 this year.”

Mr Cunningham, a retired insurance broker, said there were not many insurance companies covering strata titles.

He said it should not be a concern in the Far North because most, if not all, of the body corporate buildings since about 1981 were built to cyclone rating standards.

“The re-insurance companies overseas are charging more in a cyclone area and because of the losses they have incurred (from natural disasters overseas) they’ve put the rates up.”

Mr Cunningham said Suncorp was a popular body corporate insurer because its rates were very competitive.

“But they suffered losses because their rates were too cheap,” he said.

KIB director Janet Koch said the body corporate price rises were in line with reality.

“They’ve had a good run but now they’ve got to pay like everyone else who has a property or house,” she said.

Body corporate rates were previously less than household insurance but premiums had gone up between 85 and 300 per cent since a major insurer withdrew from the market.

Before, rates were too low to be profitable but now it also reflected rises by reinsurance companies reeling from disasters in Japan, Christchurch, Queensland’s floods and cyclone Yasi.

Mrs Koch said prices would be higher in Cairns.

“Insurance is for the unexpected, if you live in an area that expects cyclones then you have to pay. It’s reality,” she said.

Industry analysts predicted household insurance would rise in the wake of Queensland’s disasters and last month Suncorp confirmed premiums were set to rise by 10 per cent.

Insurance Council Australia general manager Paul Giles said price rises were a matter for insurers.

“Insurers base their premiums on risk,” he said.

http://www.cairns.com.au/article/2011/04/16/159381_local-news.html