Assistant Treasurer Senator Helen Coonan said today that with all Australian Governments taking concrete action to address problems in the public liability insurance market it was essential that the insurance industry deliver the results that Governments and the community expect.
Addressing an Insurance Council of Australia conference in Melbourne, Senator Coonan said that with yesterday's passing of the first anniversary of the September 11 attacks in the United States it was timely to reflect on where the insurance industry stands one year from the largest insured loss in history.
"In the Australian context, September 11 is one of a number of factors that have coincided to create unprecedented awareness of the vital role that insurance plays in every aspect of our daily lives," Senator Coonan told the conference.
"In that context, it is important that the insurance industry ensures that it can continue to offer a product that meets the needs of the community. There is also a role for Government to ensure that, with a limited set of resources, the needs of all members of our community are appropriately balanced."
Senator Coonan said that through a combination of factors, some classes of insurance were becoming unaffordable or unavailable to many business and community groups.
"This issue had, and still has, the potential to significantly further undermine the reputation of the insurance industry in this country," Senator Coonan said.
Senator Coonan said the Federal Government has provided a leadership role and taken action in those area where it has responsibility, including removing tax impediments to the use of structured settlements and assisting the insurance industry to improve its ability to measure risk.
"The Federal Government's view is that beyond this, the area in which we can make the biggest contribution to resolving the current state of the insurance market is to provide leadership to encourage reforms to stabilise the level of litigation," Senator Coonan said.
"This should have the effect of improving the foreseeability of risk for insurance companies in writing liability classes and making this business relatively more attractive.
"The existing system of compensation for negligence through the courts relies on the proposition that generous court awards are ultimately paid for by insurance companies with deep pockets.
"This proposition comes unstuck when we realise that the deep pockets of insurers are in fact funded through our insurance premiums.
"Large pay outs inevitably flow through to all policyholders in the form of higher premiums."
Senator Coonan said she would shortly be meeting for a third time with her State and Territory counterparts on the issue and would maintain the momentum for reform.
"Insurance is a vital thread running through the fabric of our community, and we must all identify what we can do, and act swiftly and surely to restore some balance and some commonsense to a system that we simply can't live without," Senator Coonan said.
Full speech is available at http://assistant.treasurer.gov.au or by calling (02) 6277 7360.