The Liberals’ plan to set up a state-owned insurance company has been labelled “astonishing” by prominent economist Saul Eslake, who warns the scheme could leave Tasmanian taxpayers carrying significant financial risk.
The proposed company, TasInsure, was unveiled by the party this week and would run alongside the Motor Accidents Insurance Board (MAIB).
It would offer home and contents insurance, cover for small businesses and community event insurance.
Premier Jeremy Rockliff claims it would save Tasmanians ‘hundreds of dollars a year’ in premiums.
But Eslake told ABC Radio he was “gobsmacked” by the announcement, especially given the government recently asked him for advice on selling off up to 16 government business enterprises.
“I find it astonishing that the Liberal Party would think it’s appropriate to set up a government business to go into competition with privately owned firms who are perfectly capable of providing insurance,” Eslake said.
He warned of “adverse selection”, where private insurers could dodge high-risk customers, leaving the government to cover bushfire, flood and crime-prone areas at artificially low premiums.
“That’s a recipe for losing money,” he said, noting the MAIB is already expecting underwriting losses of $184 million over five years to 2028–29.
“The government will end up being the insurer of last resort. They won’t be able to charge premiums that reflect the higher risks they’re running, because the whole point of this scheme is to offer insurance on the cheap.”
The Insurance Council of Australia agrees, arguing TasInsure would “put significant financial risk onto the public balance sheet while failing to do anything about the underlying causes of insurance pricing”.
General Manager of Public Affairs Mathew Jones said government and industry must work together to “address the issues underlying insurance pricing”.
“The insurance industry is committed to progressing this issue in good faith with the next Tasmanian government,” he said.
Speaking a day after launching the plan, Rockliff said he respects Eslake’s views but is not worried about what existing insurers think.
He said TasInsure “is a commitment and a policy for the times”.
“I’m not surprised that the national insurance system doesn’t like this idea because we are intervening in a failed national market to support Tasmanians first and foremost,” he said.
RACT CEO Mark Mugnaioni said the RACT currently insures around $50 billion worth of property across the state.
He said TasInsure, if it ends up operating as an “exclusively Tasmanian-focused” insurer, would be “absolutely no different to the RACT – just much, much smaller”.
“We take in about $200 million worth of premium every year across our home and motorboats,” he said.
“So this is a big task that the government has set themselves. And when it goes wrong, it can go very badly wrong if you don’t know what you’re doing.”
