What Happens

By November 29, 2012 Uncategorized No Comments

When You Are Not Too Big to Fail

The Federal Government has announced an inquiry into alleged price gouging by insurance companies for Residential Strata Title Insurance in Far North Queensland.

The allegation is that one of the insurance companies entered the market, cut premiums to win business, forced the others out of the market and has ramped up the premiums by up to 350%. Nasty stuff indeed, if true.

What is true, is that premiums north of Mackay have increased by this sum, making it virtually impossible to get a reasonable return on investment stock or to sell to owner-occupiers or investors.

The insurer blames the weather – the locals, lead by Warren Entsch the federal member for Leichardt, say that’s nonsense: North Queensland has always been a cyclone zone and insurance has always been provided so what’s changed.

Amid the competing allegations is a fundamental policy issue – should government intervene when a market fails consumers? The trouble for our FNQ friends is that government intervention in any market these days is not very fashionable, unless of course you are the US government and Wall Street overdoses on toxic loans. The European Central Bank is grappling with the same problem.

Here’s the bad news for FNQ – Wall Street at least, and the Euro zone perhaps, were thought too big to fail. Will the same be said for the home unit market in regional Queensland?

Unit owners in marginal Queensland seats where the state government goes to the polls in March 2012, need to make a lot of noise on this issue if they want state or federal intervention to drive down premiums.

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