I'm delighted to speak to the Insurance Council of Australia this evening.
Of course you have chosen to have this year's dinner at a very exciting time for those of us involved in politics, with the Treasurer having just delivered the Federal Budget.
I thought it would be timely to begin tonight's address by picking up a few of the very important measures that were announced last night in the Budget.
As you would know by now the Treasurer has delivered yet another very sound Budget with the focus very much on balancing work and family and addressing the poverty traps that impact on mothers returning to work.
In fact, it delivers the largest package of assistance for families ever - $19.2 billion over five years.
Importantly in my portfolio, the Budget also delivers income tax cuts worth $14.7 billion which are the third stage of ongoing structural tax reform and which increases the thresholds of the top marginal tax rates for those Australians who missed out in the adjustments made in the move to the new tax system in 2000.
The Government will also boost retirement savings with enhancements to the superannuation co-contribution scheme to the tune of $2.1 billion and by reducing the superannuation surcharge to 7.5 per cent by 2006-07.
The Government will also invest $5.3 billion in science and innovation, $3.1 billion in land transport infrastructure, and $755 billion extra on Australia's intelligence capabilities.
All this as well as delivering the Government's seventh surplus, and an economy expected to continue growing strongly at 3 and a half per cent.
Can I just say that the Budget delivers a dividend for all Australians only made possible by the good economic management of this Government.
But it is the topic of insurance that brings us all here tonight so I would like to turn to that issue — one I can assure you has occupied a surprising amount of my time as Minister for Revenue and Assistant Treasurer.
Insurance has not always been what the pundits call a "front-of-mind issue" from the point of view of Governments.
I must say it seemed to me to be relatively manageable alongside the behemoths of tax and superannuation when I was assessing the scope of my new portfolio towards the end of 2001.
But as you know, insurance has taken up most of the spare room in my head in the past two and a half years.
It has certainly been a very, "dynamic" time to be involved in insurance. There have been many opportunities to work alongside the industry, other Governments and the community to resolve very real and very pressing problems.
Looking back at the progress we've made together over the past two years, I'm reminded of the words of Franklin Delano Roosevelt. The day before he died, FDR wrote:
"The only limit to our realisation of tomorrow will be our doubts of today. Let us move forward with strong and active faith."
That's a pretty good description of the attitude of the Australian Government in early 2002, when we stepped up to the plate to deal with the crisis that was then engulfing the Australian insurance market.
At that time, the cost of premiums for some lines of business was skyrocketing, and the collapse of the HIH Insurance Group was adding fuel to the fire.
The damage wreaked by the collapse was far-reaching. HIH policyholders were suddenly faced with the possibility that their policies would not be honoured and insurance leapt into prominence in the public consciousness.
You would all be aware that the Government responded quickly, appointing a Royal Commission, and then responding to its findings, introducing strengthened prudential requirements for general insurers and undertaking an extensive program of reforms to address concerns about the availability and cost of insurance.
There have now been seven successful Ministerial Meetings on insurance issues with counterparts from State and Territory Governments.
These meetings have been characterised by a refreshing, perhaps unique, spirit of non-partisan cooperation which has demonstrated the kind of effective, cooperative relationships that can be forged in a federation between tiers of Government looking through the prism of a significant community crisis.
All jurisdictions have agreed to, and progressed, legislation to implement major reforms, including reforms to the tort law, to improve the affordability and availability of liability insurance.
As a result, the insurance climate in Australia has already vastly improved.
Just last month, I had the pleasure of launching a new insurance company, AssetInsure — the first new entrant to the insurance market since the collapse of HIH. The arrival of AssetInsure is a very tangible indicator of investor capital beginning to return to the sector.
And I was pleased to read at the end of April that ReAC are considering coming out of run-off and entering the general insurance market. These new entrants herald a return to a more positive phase for the Australian insurance industry.
The reforms are working. Just yesterday, there was an article in The Age about the number of personal injury cases in the Victorian County Court plummeting, dramatically demonstrating how effective reforms in that State have been, just as one example.
The enormity of the insurance reforms undertaken by the Commonwealth and the States, outlined in a booklet (Reform of Liability Insurance Law In Australia) which we produced for the international reinsurance markets, is the envy of other jurisdictions.
Time and again I am being told that the reception given to Australia's reforms by Lloyd's underwriters and other players in the London market has been extremely warm and indeed some are touting Australia as a model for other jurisdictions.
I don't think anyone here will disagree that we must keep up the momentum to complete the reform process.
Unfortunately, we are now in a position where these important reforms are being deliberately put at risk at the Federal level by the Australian Labor Party and the Democrats in the Senate.
In an election year, talk will inevitably turn to whether the business community thinks the grass might be greener on the other side.
This is obviously healthy in any democracy, but I invite you to consider whether you could possibly support a political party that shows no grasp of the challenges facing your industry.
From my policy and portfolio perspective I find it difficult to make any meaningful analysis of the approach Federal Labor have taken to the insurance crisis, because they have been virtually silent throughout, until leaping up at the last minute to block vital reforms to the TPA that will close a loophole that allows a no fault alternative to law suits that would fail if they were brought as negligence cases under state law.
Labor's opposition to legislation that does not take away the right of people to bring actions for negligence in state courts, where they rightly belong, simply defies rational explanation.
The ALP's position on these amendments to the TPA is out of step with the recommendations of an expert review panel, the views of state and territory Labor governments, and with industry sentiment. And most importantly, the ALP's position runs counter to the interests of the Australian community.
New cases of the TPA being used to avoid state reforms are being brought to my attention. My concern is that while the ALP dithers and plays politics in the Senate, that trickle of cases will become a flood.
It is clearly impacting on the ways actuaries are pricing premiums.
The fear is that any reduction in claims costs will fall victim to a honeymoon effect, with gains quickly eroding as plaintiffs seek damages by alternative routes.
Leaving open this Trade Practices Act loophole is political opportunism of the most blatant kind and I challenge the industry to take up this cause with Labor if you are interested in retaining and consolidating the gains that have been made to rebalance a system that had become unsustainable.
As you would also be aware, there is some very important legislation we are progressing in the Parliament at the moment, which I should mention, including the Government's Bill to support State professional standards schemes.
These schemes introduce compulsory insurance cover, risk management strategies, professional education and appropriate complaints and disciplinary measures in return for capped liability for economic loss.
This is very important legislation.
The Senate Committee inquiring into this legislation is due to report its findings tonight, so it will be very interesting to see if Labor is going to seek to stymie that Bill as well, as was being mooted in the Financial Review this morning.
If they do, they will prove beyond doubt that they are completely out of step with their Labor colleagues in the States and out of touch with the needs of the community.
Instead, they are aligning themselves with the Democrats' idiosyncratic view of how insurance works that ignores the weight of evidence and the compelling need to complete these reforms.
We also have the related measures implementing proportionate liability for economic loss, which are being progressed as part of the CLERP 9 package of reforms, and due to be debated in the Senate this session.
While we have made impressive gains, there is still work to be done by all parties — the Commonwealth, state and territory governments, as well as the industry itself.
For example, I know many of you are currently providing input into the draft amendments to section 54 which have been produced by the Review of the Insurance Contracts Act. And of course consultations continue regarding APRA's discussion paper on the second phase of general insurance reforms and in particular in relation to standards to be applied to corporate governance and board composition.
All levels of government have worked extremely hard, and expended considerable political capital, in expediting these reforms. We have done so, not to pursue reform for its own sake, but to improve the cost and availability of public liability and professional indemnity insurance for the Australian community.
I have talked about the responsibilities of governments and oppositions, but the insurance industry also has its responsibilities.
At June 2003, total assets of Australian general insurers amounted to $73.6 billion.
Recent reports including the JP Morgan Deloitte Survey indicate that the general insurance industry is currently experiencing one of the best underwriting periods in its history.
The combined ratios being generated by the industry are at or below the best achieved since 1976 and significantly below the historical average.
These figures highlight how critical it is that the insurance industry passes on some of the benefits flowing from the reform of the system to Australian policyholders, who have been greatly impacted by rising premiums.
The Australian Government has tasked the ACCC to monitor costs and premiums for public liability and professional indemnity insurance over two years and the ACCC has said it will seek more powers to monitor premiums if there is evidence benefits are not being passed on.
From a broader perspective, there does need to be a quid pro quo from industry at the earliest opportunity to give the reform process added credibility.
But the industry also deserves some bouquets.
One shining example of the insurance industry's response to the crisis is the Community Care Underwriting Agency, set up by Allianz, NRMA Insurance and QBE, which has written cover for more than 1,100 not-for-profit organisations across Australia including Kids Safe Australia, Riding for the Disabled and a variety of counselling and youth services and sporting activities.
The agency has provided insurance cover for events as diverse as street fairs, Neighbourhood Watch and knitting clubs. This is the kind of good corporate citizenship Australians expect to see from the companies they buy goods and services from and I would encourage all members of the industry to continue to respond favourably to unmet need in the community and not-for-profit sector.
Although sound contributions from all stakeholders means to some extent the immediate crisis that presented itself in the insurance market two years ago has abated, it would be unwise not to keep up the momentum for reform.
I am constantly reminded of the cost to the community in other jurisdictions of failing to restore some sense of personal responsibility to the system. Recently in Chicago a civic-minded gentleman by the name of Dave Peterson was asked by his local county to stop dragging a home-made snowplough behind his bicycle as he rode to work each morning and home each night.
Although Mr Peterson's conscientious ploughing meant the Forest trail he rode was cleared each day and could be used by other residents, the county feared a lawsuit would arise because Mr Peterson was creating an expectation that the "trail would be ploughed". I suppose that is different to a "trail being blazed", but no doubt that would be frowned upon too.
Or the case reported by the American Tort Reform Association, where a Connecticut mother apparently sought lost wages for her two-year-old who cut his head running into a green railing in a playground. She argued that her son had suffered the cuts because the railing was not painted brightly enough, and the toddler would be unable to work as a model or actor (hence the loss of earnings) while his head healed.
But it is not just in the United States where we can see commonsense thrown out the window by a society is in the constant thrall of litigation.
In December last year a Canadian father and lawyer sued the Springbank Minor Hockey Association in Calgary for $50,000 (Canadian Dollars) because he believed his son was placed on an inferior hockey team. He claimed that league officials favoured their own children and put them on superior teams.
Some would say that cause of action would find fertile ground in a Ministerial reshuffle!
The list goes on and on. Like the gent who sued Tampa Electric, along with six hotels that sold him alcohol on the day he broke into a locked electricity substation in a drunken stupor, climbed a transformer and not surprisingly was blasted by 13,000 volts of electricity.
I have heard that God takes care of drunks and small children, but that doesn't mean judges have to compensate them.
Although these cases have little merit, there is obviously a serious side, as any insurance company paying out on public liability claims can tell you.
None of us want to see that culture of blame and compensation entrenched in Australia, and I believe in the last two years, as a nation, we have taken great strides towards a more sensible and balanced approach to these issues.
So let us continue, as Franklin Delano Roosevelt would have put it, to set aside "our doubts of today" and "move forward with strong and active faith". Because only by doing so, can we continue to build on our gains — for the benefit of the Australian community.