The Minister for Financial Services and Regulation
21 October 1998 - 26 November 2001
8 May 2001
MINISTER HOCKEY: I have today had a chance to look at the Insurance Council's submission which I received in relation to HIH. The submission is quite detailed and raises a number of questions. The Government continues to consider all the options available to help those who are enduring hardship as a result of the financial collapse of HIH. We are still in no position to make any firm announcement because we have not received adequate information from the provisional liquidator.
REPORTER: Isn't there a sense of urgency though?
MINISTER: I have spoken with Minister Larry Anthony and asked him to ensure that Centrelink expedite any claims being made by HIH policyholders who might be suffering as a result of the financial collapse.
REPORTER: Should there be an inquiry?
MINISTER: It is too early to give a running commentary on what has happened. We are talking about the financial collapse of a multi-billion dollar company. The Federal Government needs to be extremely careful about the words it uses because any major statements at this stage may allow those people with legal liabilities to support HIH, to run away from their obligations. So, we are very carefully considering what options are available. We also have no information at this stage to indicate the size of the problem at HIH. We also have no information to be able to determine exactly what policyholders are suffering hardship, who those policyholders are, whether their claims have been processed by HIH or not. So I think what needs to be said is that we are doing absolutely everything we can to understand the depth of the problem at HIH.
REPORTER: But isn't that why we should have an inquiry?
MINISTER: Well no, because we have already set up a taskforce within the Government headed by Treasury with the Attorney-General's involvement, with the involvement of the corporate regulator ASIC, the prudential regulator APRA. They are providing on-going and daily advice to myself and other government ministers and once we get more information and we expect to get this over the next 10 days from the provisional liquidator, we will be able to respond.
REPORTER: What is your general attitude to a levy?
MINISTER: We need to consider all the options to address the hardship of individuals. There are upsides and downsides in a levy. We need to focus on how we can help those most in need during this difficult time. But most importantly, we need to be able to identify all the individuals that are suffering hardship. There are some individual cases that have been presented through the media and directly to myself and the Government. But we need to come up with a plan that is going to assist all that are enduring hardship, and not just a few.
REPORTER: Are you ruling out an inquiry that some of the States are calling for? Are you ruling out an inquiry like that for all time?
MINISTER: I think the best advice I can give to the States is to ask them to work co-operatively with the Commonwealth to address the concerns of those enduring hardship. [interruption]
I think that it is important that the States understand that they have to stand behind their obligations. And the Premier of Western Australia deserves credit for standing behind his government's obligations in relation to HIH. I ask that the other premiers in the other States take similar action to respond to their own State Government-guaranteed programs and State Government insurance programs. The Commonwealth in the meantime is doing everything it can to better understand the size of the problem at HIH and exactly where the hardship is falling.
REPORTER: But don't those policyholders need help now and not later on?
MINISTER: We are doing what we can. We are speaking to individual groups in the private sector that are part of the professional indemnity schemes who are also providing public liability support. We have been engaging in extensive discussions with the Insurance Council and the insurance industry for some time now. And part of the proposal yesterday is a result of our discussions with the insurance industry. We are not talking about a simple corporate collapse. We are talking about the most complicated corporate collapse that you could possibly have that of an insurance company. And even then, you are talking about the corporate collapse of the second-largest general insurer in Australia. So, it is an extremely complicated issue that requires a lot of work. We have a large team working overtime to understand the issues and try to obtain further information from the provisional liquidator.
REPORTER: Some States would argue that this is your fault because you didn't monitor the regulator closely enough. How do you respond to this?
MINISTER: I don't think it helps anyone in hardship if we get into the blame game. I think we all need to focus on how we can help those people who are enduring hardship at the moment and there is not doubt that, over the fullness of time, the collapse of HIH will undergo enormous scrutiny. And perhaps when it all comes to the fore, people will be better able to understand exactly how a company that had $960 million of net assets, signed off by the auditors, signed off by the directors, on June 30 last year, could be in substantial financial collapse just a few days later.
REPORTER: Can you understand the anger of people when you see people like Ray Williams getting a million-dollar payout despite the fact that it has gone under?
MINISTER: Look, I can understand the hardship people are going through when they look at some of the benefits of some previous shareholders and directors of HIH, and yet have still not have their own claims paid, as a result of the financial collapse. But we need to move on to protect those who are enduring hardship. But at the same time, I can assure you that all the resources available and necessary for the Australian Securities and Investments Commission are being utilised to ensure that we get to the very bottom of the financial collapse.
REPORTER: Was Cabinet briefed today on the levy, and what are the downsides as you see it to the levy?
MINISTER: I am not going to speculate on the levy proposals from the Insurance Council. I continue to have very in-depth discussions with my ministerial colleagues and they will continue. Once we obtain further information from the provisional liquidator, which I expect the first line of information will be available in the next 10 days, then we will be able to give a more complete response.
REPORTER: So, what happens in 10 days?
MINISTER: We'll just wait and see once we have received the information from the provisional liquidator.
REPORTER: Will it involve you putting a proposal to the States to trim some insurance taxes?
MINISTER: The States are collecting all the tax from insurance. They are receiving in excess of $3 billion a year from tax on insurance. There is no doubt that insurance is being too heavily taxed by the States. There needs to be some common sense. Whatever comes out of this, needs to be a proposal for better regulation nationally of insurance, including the fact that there are different workers compensation schemes in each State, there are different compulsory third-party schemes in each State, there are different builders warranty schemes in each State. Some States guarantee their obligations, other States have a private sector scheme. What we need is a single uniform code in relation to individual insurance schemes. We will be saying a bit more about that in the not-too-distant future.