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What does the sale of the Territory Insurance Office (TIO) mean to customers?

George Newhouse from Shine Lawyers Disaster Insurance Team gives his thoughts.

The sale of the Territory Insurance TIO will bring a cash windfall to the Northern Territory government but Territorians should examine carefully what the sale of the TIO means for them. If the experience of North Queenslanders is anything to go by then Territorians can expect higher premiums and less cover. It is vital that they pull out their insurance policies each year and carefully review the risks covered and the level of cover for the identified risk.

State Insurers have a special interest in looking after their local customers. Queensland suffered a number of extreme weather events in 2010 - 2011 from the worst floods in 35 years to the shock of tropical Cyclone Yasi. Many Queenslanders were comforted by the fact that the major insurer in Qld, Suncorp Insurance, stood by Queenslanders and, on the whole, covered them for flood and cyclone events. Many of the interstate and international insurers did not do the same.

Territorians should also be aware that since Cyclone Yasi, a number of insurers have abandoned insurance in some regions, and strata insurance premiums in North Queensland have increased by 200-800% causing many retirees to struggle to stay in their homes.

It is a basic principle of economics that less competition means higher premiums. As a result the Federal Government has recently floated a proposal to allow foreign insurers into the North Queensland to help bring premiums down but this is being strongly resisted by the Insurance lobby.

The lesson from Qld is that big local insurers are more likely to cover all Territorians for all risks. I am concerned that privatisation will see sly insurance practices sneak into the Territory. The average person is not normally aware of the insurance companies’ tricks like capping levels or excluding cover for storm water, flood and existing workmanship and of their polices to delay, deny and defend themselves against legitimate claims.

Most Australians aren't aware of the fact that while Australian Insurers are making hundreds of millions of dollars in profits, many North Queensland retirees are struggling to pay their strata insurance premiums. Locals say that insurance premiums for strata title unit buildings in North Queensland have risen 200-800% and more since tropical cyclone Yasi. Many of our elderly are struggling to remain in their homes. Territorians need to ensure that won’t happen to them.

The Insurance Council of Australia (the ICA) recently put out a media release to stress that insurers aren't gouging their customers and argued that the pricing of insurance in North Queensland is reasonable. They need to take a look at the petition, “Help North Queenslanders get fair and affordable insurance premiums” at On it they will find 83 year old retirees complaining that they cannot pay their bills as a result of insurance premium increases, others complain of strata insurance premiums quadrupling to $32,000 p.a. and in one building 30% of all owners are unable to pay their levies due to increased premiums.

To add insult to injury the ICA also wants international competitors, who are expected to offer cheaper cover, to be locked out of the North Queensland market.  Perhaps we should expect as much from an industry association committed to protecting its members’ financial interests. It takes guts to argue for maintaining the status quo but the ICA are defending an industry that has been condemned in the US for using unethical strategies to take advantage of their trusting clients for over 20 years now.

When a catastrophe hits, homeowners and businesses expect their insurer to deliver on their promise to help them get back on their feet after a loss. Unfortunately for some policy holders, since the 1990’s insurers have implemented strategies to maximise their profits by consciously deterring their customers from obtaining their legitimate entitlements. They do this by deliberately "low-balling" or discounting their clients’ claims or denying their insurance claims altogether.

These strategies, developed by professional management consultants came to light in the US case of Hager v Allstate Insurance. Lawyers for Ms Hager alleged that Allstate Insurance offers some claimants a simple choice when they make a claim. They can choose a gentle hand by complying and accepting a low ball offer or, if they don’t accept the offer, then they can expect a blow from a fisted glove, in the form of years of protracted and expensive litigation.

This miserable strategy relies on the fact that many inexperienced claimants will drop off if their claims are denied or discounted as they do not have access to advice or have the resources to maintain a battle with their insurer.

It works like this; if you accept a pittance from your insurer then your claim will be processed promptly otherwise you will wait - sometimes years and you will need to employ lawyers if you want to fight for what is rightfully yours.

It’s a simple plan that makes perfect sense to management consultants but it goes against the principles of trust and faith upon which insurance was once based. Today, instead of paying out in good faith, Insurance companies want to hang on to your money as long as they can so they can earn more profit on it.

The problem for retirees in the Territory and for claimants around the nation is that the Insurance industry are effective lobbyists and they have been extremely successful in looking after their own interests at the expense of their customers. There are few legislative protections for claimants who get caught this way with nowhere to turn except to lawyers to enforce their rights.

Territorians deserve better than this and they need stronger protection. In particular, because Strata owners are forced to insure their property under Territory law, both the Territory and Federal Governments have a duty to legislate to protect their citizens.

If the sale of the TIO is to proceed, Territorians should demand legislative protection to ensure that there is real competition and that they are adequately covered for floods and cyclones without sneaky caps and insurer tricks. In the meantime Territorians need to review their policies with a lawyer or insurance broker that they trust. It is worth considering an experienced Insurance Broker to advise on cover and to shop around for the right cover at the right price.

Shine Lawyers represent a number of clients who have had their claims reduced or denied unfairly by their insurers in particular for flood, fire and cyclone claims and have been advising others on the unreasonable jump in premiums in North Queensland.


Written by George Newhouse

Written by Shine Lawyers. Last modified: November 26, 2014.

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