The Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan and Parliamentary Secretary to the Treasurer, Senator the Hon Ian Campbell today announced the release of the Australian Competition and Consumer Commission’s Public Liability and Professional Indemnity Insurance Monitoring Report.
The report was commissioned by the Government as a result of a commitment made by the Commonwealth to a Ministerial Meeting on Insurance Issues held on 30 May last year. The report follows on from two Insurance Industry Market Pricing Reviews undertaken by the ACCC and released in March and September 2002.
The report confirms that the cost of providing public liability and professional indemnity insurance has increased over the past five years and that the major driver behind these increased costs and associated premium hikes is an increase in the cost of claims.
The report was based on data received from insurers for the year ending 31 December 2002 and concludes that at this point, it is too early to tell the full impact that law reform will have on lowering insurers’ costs and the extent which insurers will pass on any cost savings to consumers.
Senator Coonan said “Importantly, the report indicates that insurers expect claims costs to be on average five per cent lower in 2003 as a result of law reform.
“This translates to three percent lower premiums in 2003 than would have been the case in the absence of law reform.
“This shows that we are on the right track to delivering more affordable public liability insurance to the Australian community.
“But for professional indemnity, the outlook is not so good with no adjustments expected to insurers’ pricing structures in 2003 as a result of law reform.
“This analysis brings in to sharp focus the need for all States and Territories to do more for Australia’s professionals.
Senator Coonan will chair a meeting of her State and Territory Ministerial counterparts this Wednesday in Adelaide where professional indemnity insurance will be a major focus.
“The Commonwealth will amend the Trade Practices Act and other relevant legislation to support Professional Standards Legislation which has already been enacted in New South Wales and in Western Australia,” Senator Coonan said.
“I am hopeful that other States and Territories will also do the right thing by professionals by signing up to a national scheme of Professional Standards Legislation.”
The report also indicates that underwriting conditions have become more favourable for insurers.
- In 2001, for every $100 that insurers received in premiums for public liability insurance, they paid out $121 in claims costs and other expenses. In 2002, for every $100 in premium, insurers paid out only $96.
- In 2001, for every $100 that insurers received in premiums for professional indemnity insurance, they paid out $114 in claims costs and other expenses. In 2002, for every $100 in premium, insurers paid out only $85.
Senator Campbell said “These results show that the market for public liability and professional indemnity insurance is increasingly becoming more attractive for insurers.
“I have asked the ACCC to continue to update its report on a six monthly basis for the next two years. All Governments will be watching closely to ensure that the positive benefits of reform are passed on to consumers.”
The report is available from the ACCC’s web-site at www.accc.gov.au.