The Commonwealth, State and Territory Ministers and the President of the Australian Local Government Association (the Ministers) restated their shared determination to tackle the problems of rising premiums and reduced availability of public liability insurance.
The Ministers agreed that many of the issues are complex and cross-jurisdictional, requiring collective action from governments and industry in the immediate and long term. The problems being confronted in the public liability area are not unique and are also evident in other insurance classes.
The Ministers received an expert report identifying the major factors behind rising premiums and reduced availability of public liability insurance as being:
- changing community attitudes to litigation;
- change in the courts' view of what constitutes negligence;
- increased compensation payments for bodily injury claims;
- past under-pricing and poor profitability of the insurance industry;
- the collapse of HIH, a major player in the public liability market; and
- a decision by insurance companies to be more selective about the risks that they cover.
The Ministers noted that a number of jurisdictions had already undertaken a range of initiatives including facilitating group insurance for not-for-profit organisations, tort law reform and development of risk management guidelines.
Ministers agreed that:
Structured Settlements
1. The Commonwealth will introduce legislation to make tax changes to encourage the use of structured settlements for personal injury compensation.
2. The States and Territories will make such legislative changes as are necessary to remove the barriers to structured settlements as an alternative to lump sum pay outs.
Reform to Claims Costs
3. Subject to evidence that changes will increase affordability and availability of cover, the States and Territories will examine:
- targeted claims cost reduction by, for example, protecting volunteers, community and appropriate sporting organisations from actions;
- broadly based tort reform; and
- legal system costs and practices, such as legal advertising.
Trade Practices Act/Fair Trading Acts
4. The Commonwealth, the States and Territories will examine relevant sections of the Trade Practices Act and comparable State and Territory legislation to consider the extent to which individuals can legally and confidently assume personal responsibility for high risk activities.
Group Buying
5. State Governments would encourage group insurance buying where appropriate.
Role of Insurance Industry
6. The insurance industry will be asked to collect more detailed information on claims experience through a co-operative industry arrangement.
7. A representative of the Insurance Council of Australia will be invited to address the next meeting of Ministers.
8. Ministers encouraged the insurance industry to be more innovative and responsive in product development and communications with consumers.
Data
9. The Commonwealth will consider widening data collection on the insurance industry by APRA and will report to a subsequent meeting on the impact of the new prudential requirements for general insurers.
10. The States and Territories will collect data on claims and costs and provide it to Heads of Treasuries.
Risk Management
11. States and Territories will provide advice to Heads of Treasuries on risk management practices introduced in their jurisdictions that have assisted in making insurance more available and more affordable.
12. The insurance industry will be asked to advise Heads of Treasuries on other effective risk management procedures.
There was also agreement that the problem needed to be tackled against two frameworks - one of addressing rising claims costs and the second of addressing the availability of insurance cover. Ministers recognised that there were no easy solutions but that work will commence immediately on the above.
Given the multiplicity of the functions in governments impacted by the problem in public liability markets, the meeting agreed to request that the Council of Australian Governments (COAG) on 5 April 2002 endorse the outcomes of today's meeting.
Recognising the complexity, urgency and technical nature of many of the issues, Ministers agreed that the Heads of Treasuries Group, which will include the Commonwealth and Local Government, was best placed to develop practical measures for consideration by each Government by 30 April 2002.
Ministers noted that the Commonwealth had asked the Australian Competition and Consumer Commission to update its recently released report on Insurance Industry Market Pricing by July 2002. The report will analyse the competitiveness of the public liability and professional indemnity markets and the Australian Securities and Investments Commission will be asked to provide advice on improving the information to consumers in insurance policies.
Ministers acknowledged the significant contribution from stakeholders and thanked those who made submissions for the meeting. These submissions will be further considered by the Heads of Treasuries Group.
Ministers agreed to meet again in May.