MINISTER: The government and the insurance industry have today agreed on a structure to support those enduring hardship as a result of the collapse of HIH. The industry has agreed to set up a not-for-profit company that is going to process the claims of those most hard hit by the collapse of HIH. This non-profit structure is going to be funded by the Commonwealth Government, it is going to process as quickly as possible the claims that we can identify for those who are enduring hardship.
The tentative structure is that the company will buy out the claims and will become a creditor to HIH, this allows the federal government to pursue through another angle those who are responsible for the collapse of the company. The States of course already have structures available to them to process claims in their particular fields, they are guarantors of insurance, they have responsibility for particular lines of insurance. The Commonwealth Government has no infrastructure at present to be able to support the HIH policy hardship initiative therefore we have had to set up a structure very quickly, we're very grateful the insurance industry has been working very hard with us to come up with a structure that maximises the support for those enduring hardship.
The initial indication from the insurance industry is that four companies NRMA, Allianz, Royal & Sun Alliance and QBE will be involved in the structure that will enable claims in particular areas to be processed as quickly as possible in the normal fashion. We are aiming to work as hard as we can now with the assistance of the provisional liquidator over the next few days, over the weekend, to ensure that we can identify particular classes of insurance that will receive support from the Commonwealth Government.
Now I want to emphasise in all of this, this is focussing on the interests of policy holders most harshly affected by the collapse of HIH, this is how we can get to those people enduring hardship at the moment and how we can get to them as quickly as possible. We also need to remember that we have seen the collapse of the second largest general insurer in Australia, setting up separate infrastructure is a massive task, a massive task and because it is a massive task we needed to work very closely with the industry to come up with the normal processing structures that will ensure people get the support they need as quickly as possible.
QUESTION: Minister, will every claim be met?
MINISTER: The government will be announcing, once we can get some more information from the provisional liquidator, what claims will be met and how they will be met.
QUESTION: How much is it costing the Commonwealth Government?
MINISTER: Well, the industry has indicated that it is setting up the company, we've indicated it is a non profit structure, it will be part of the package that we announce once we have got some more detailed information from the provisional liquidator.
QUESTION: Will the insurance companies themselves be putting in money as well?
MINISTER: The insurance companies have agreed to work through this on a non profit basis, you've got to understand that the fact that this is being set up is a substantial commitment from the insurance industry, combine that with the fact that of the restructuring proposals I announced in detail recently it will involve potentially billions of dollars of restructuring for the insurance industry in Australia, so this is primarily focussed, again, on those enduring hardship as a result of the collapse of HIH.
QUESTION (inaudible)
MINISTER: It is a non-profit structure, I come back to this - it is a non profit structure.
QUESTION: What incentive do they have then?
MINISTER: Well I think the insurance industry and Raymond Jones is the Chairman of the Insurance Council of Australia, Raymond you may like to say a little about that.
RAYMOND JONES: Certainly the ongoing health of the industry is very important to us, there has been a lot of damage done to the confidence of consumers in the insurance industry so those players who are still involved need to work very closely with the government to make sure we get through this in the most equitable possible fashion, so that's why we are heavily involved, we commend the government for their initiative and we will work closely with them to make sure these hardship claims are paid.
QUESTION: The Minister said it's not for profit but you would be wanting to make sure you don't have any losses over it?
RAYMOND JONES: Correct, it's a not for profit, there will be no profits made by the companies involved but certainly cost recovery is there.
QUESTION: So the companies are just actually lending their personnel and expertise and not much else?
MINISTER: No the companies will be putting, the insurance industry will be staffing this organisation, HCS, HIH Claims Support, I understand it will be called, they will be staffing it, the federal government hasn't got the expertise available to it to be able to process individual claims, that is a very complicated task as any of you who have ever made a claim with an insurance company would understand and so unlike the states who have the motor accident's authorities, workcover and various other organisations, the Commonwealth has no infrastructure and never had an infrastructure for that purpose so we are now working with the industry to establish that infrastructure to get the best people available to support that infrastructure and then further down the line they will be using the resources of at least the four companies already announced to help to process claims in individual product lines.
QUESTION: The NSW Premier this morning said that the governments investigations so far have smelt of conspiracy, what's your response to that?
MINISTER: My response is, Kim Beazley and Bob Carr are playing really grubby games at the moment that are not helping to deliver 1 cent to those enduring hardship, not 1 cent and the more the state governments snip away in political backdoor trading with the Labor party on this the more it is hurting those people enduring hardship and we're getting fed up with State Governments playing their stupid games which isn't delivering 1 cent to those enduring hardship.
QUESTION: Have either of you seen Ray Williams (inaudible).
MINISTER: I've never seen Ray Williams, I don't think I've ever met Ray Williams, I don't know where he is and at the moment we're leaving all those things to ASIC
QUESTION: What information do you have now, that has allowed you to make this announcement now as opposed to a month ago?
MINISTER: Well the information comes primarily from the provisional liquidator who has been able to give us class lines, it's also about the size of the problem that is starting to emerge which has allowed us to put in place an infrastructure, this is an extremely complicated task, I can't emphasise that enough, I mean there is no company that could be more complicated than an insurance company, in its structure or in its internal mechanisms. The second largest general insurance company in Australia has collapsed the government and the industry are working together to ensure that those are enduring hardship are getting support as quickly as possible.
QUESTION: When will the first victims be able to make that first phone call to HCS?
MINISTER: We're working on a timetable at the moment, part of that is related to the fact that we are still waiting on figures from the provisional liquidator which he has confirmed to me will be available to us on the 25 May. That will allow us to quantify the size of the issues before the Commonwealth Government. It will also enable us to have better information about the class of claimants. Not all claimants are going to be picked up, we've said that, we are focussing on those enduring hardship, but now we have a structure that is going to enable us to identify people, to work through the problems.
QUESTION: Its going to be a huge task wading through all of those claims, why can't we begin that task tomorrow?
RAYMOND JONES: If I could just put a perspective on that please. The companies involved have got a lot of resource requirements to identify to start to quantify just what is involved in this so its not going to happen overnight its going to be a few weeks at least to get the quantification right and get the people in place, so we will work very hard on this we will give it a high priority to get these structures in place but its not going to happen tomorrow but it will be very soon.
QUESTION: What about claims that you should also be putting in money yourselves to help people in hardship.
RAYMOND JONES: Well the insurance companies involved had nothing to do with the collapse of HIH and any suggestion that we should damage our shareholder capital .
QUESTION: but you have significant assets available to be
RAYMOND JONES: which would damage our shareholder value and further weaken the current status of the industry, which would be unacceptable to everybody.
QUESTION: Taxpayers had nothing to do with it either, particularly those that had nothing to do with hih, yet they're having to foot the bill through federal government and state government and through possible increases in policies.
MINISTER: Can I just emphasise, I understand where you are coming from, can I just emphasise, the Government is not bailing out any insurance company. The Government is not bailing out HIH. The Government is focussing on how to help those people in hardship, individuals, and I think Government's have a responsibility to help individuals in the community facing in some cases extreme hardship, that is the view of the Howard Government. We have to help individuals enduring extreme hardship. Now, you know this collapse has significant ramifications for the insurance industry not only in Australia but around the world, it is a global company we are focussing also on the importance to Australia of maintaining a reputation of having a good and robust insurance industry, that is part of the equation, but the only factor that is weighing on our minds that is of any relevance when it comes to spending tax payers money is how can we help those people enduring hardship.
QUESTION: The argument is that the industry is not helping ease the financial burden on the public purse why is that not happening.
RAYMOND JONES: My response once again is that the industry, as in the companies that are still operating had nothing to do with the collapse of HIH, it is important that those companies go forward in a very healthy financial situation for the benefit of all Australian consumers any attempt to weaken the shareholder value of those companies would be detrimental to consumers and small business.
QUESTION: The involvement of the NRMA, of the four companies that are involved in this process it won't bear any cost on them at all or on the policy holders as a result?
RAYMOND JONES: The costs of those companies will be recovered. There is absolutely no profit as the Minister has said. There is significant time and resource required to set this up and to make it work and we are committed to doing that, so there is a huge burden on us in terms of the administrative process but it is a cost recovery, non profit basis.
QUESTION: Can you tell us, you said on the way in here this morning that APRA wouldn't come under the investigation (inaudible).
MINISTER: ASIC is not investigating APRA. The Prime Minister has made it quite clear what is going to happen. What we are focussing on at the moment is how to help those people most in need. The blame game is not delivering 1 cent, not 1 cent to anyone and the more the states focus on the blame game instead of getting money out to those who are enduring hardship the more they are letting down the people who have put them there.