New economic analysis released today indicates that the Tasmanian Government’s proposed state-owned insurer, TasInsure, may not effectively tackle insurance affordability issues and could expose taxpayers to substantial financial losses. The independent report, conducted by Lateral Economics for the Insurance Council of Australia (ICA), outlines significant establishment and operational costs associated with the initiative.
Financial Implications of TasInsure
The proposed TasInsure scheme would necessitate initial establishment costs estimated at $150 million. Additionally, the analysis suggests that prudential capital requirements could reach up to $510 million. Annual operating deficits are projected to be as high as $13 million, potentially depleting the reserves of the Motor Accidents Insurance Board within 15 years. This would likely require taxpayer-funded financial support.
While the ICA acknowledges the Tasmanian Government’s aim to improve insurance affordability, it stresses the need for alternative strategies that can provide greater benefits without imposing financial risks on taxpayers. Current challenges regarding insurance affordability are largely driven by escalating costs linked to extreme weather events and persistent inflation, particularly within the building and construction sectors. As properties require more frequent rebuilding at higher costs, the financial burden on residents increases.
Tasmania’s unique risk profile exacerbates these issues; approximately 98 percent of the state is classified as bushfire-prone, and property values exceed 278 percent of the state’s economic output— the highest ratio in Australia. These factors highlight the necessity for evidence-based solutions aimed at reducing the drivers of insurance costs rather than transferring risks from a stable private market onto taxpayers.
A Call for Resilience and Collaboration
Insurers have expressed their commitment to collaborate with the government in developing solutions that directly address the root causes of rising insurance costs. In a statement, Andrew Hall, CEO of the ICA, emphasized the importance of implementing effective long-term strategies for Tasmanians. He stated, “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.”
Hall referenced the success of the Launceston flood levee, which protected the region from $216 million in losses during the 2016 floods and continues to generate annual premium savings of up to $14 million. He argued for solutions that not only reduce risks but also foster resilience, stating, “Instead, let’s invest in resilience that delivers ten-fold returns, remove unfair state taxes, and modernise laws that are costing small businesses.”
The insurance industry stands ready to engage constructively with the Tasmanian Government and the community to create sustainable solutions that will enhance insurance affordability for families and businesses in the long term.
