Northern Territory insurance brokers fear policyholders in some areas could see their premiums multiply or even miss out on cover entirely after the sale of the state-owned Territory Insurance Office (TIO).
Allianz Australia is the successful bidder for TIO’s insurance operations, with the organisation’s banking arm being split off and sold to People’s Choice Credit Union.
In total, the NT Government will receive $424 million from the sale, which was approved by the NT Cabinet on Sunday night.
The government has promised to spend $50 million on flood mitigation works in Rapid Creek and Katherine as part of the sale conditions, as well as setting up a $215 million infrastructure development fund.
Allianz will also manage the NT Government’s Motor Accidents Compensation scheme for the next decade.
Allianz Australia Managing Director Niran Peiris says Allianz was attracted to TIO because it predicts NT as having a major role in Australia’s future growth and development.
“Allianz is Australia’s fourth largest insurance company, but our presence in the Northern Territory is well below that of other states,” he says.
“Thus, TIO was a perfect ‘fit’ for Allianz in a business sense.”
Subject to parliamentary and ACCC approval, Allianz will take ownership of TIO on 2 January. It is understood Allianz will face restrictions on coverage for three years.
However, Insurance Advisernet’s Brett Hagan told the ABC the sale would limit the availability of cover in some remote and isolated areas.
“With the sale of TIO, depending on what the attitude is of the new purchasers, that may become quite difficult for these people in these areas to get coverage at all,” he says.
“Other companies basically price themselves out or sometimes quite openly say they don’t want to quote in those areas.
“The market will price a premium in those areas which are probably double, triple or quadruple what people are paying now, because they are able to do that with TIO not being present in the market place.”
However, LMI Group’s Professor Allan Manning has written that regardless of the change in ownership, TIO would move from community ratings to individual risk ratings.
“If you do not live in a flood-prone area, this is good news for you,” he wrote in The Conversation. “If you are in a flood zone, then your premiums are likely to increase due to the flood risk of your property.”