Stability within the insurance industry is the key to putting downward pressure on insurance premiums, Federal Assistant Treasurer, Mal Brough said today.
Releasing a layman's 'Report Card' on the Tort Law reform process, Mr Brough said a failure to maintain the reforms would simply expose the community to the risk of higher premiums and less availability of insurance by recreating the factors that contributed to the 2001 insurance crisis.
"Three years ago the insurance industry was in crisis following a rapid increase in litigation, unsustainably low premium pricing and the subsequent collapse of HIH. It triggered a succession of events which saw insurance premiums spiral out of control, if insurance was available at all, and a dramatic loss of confidence in what is an important industry to the Australian economy," Mr Brough said.
"Community groups, small businesses, doctors, and local councils will remember only too well how difficult it was to access or afford adequate insurance.
The states, territories and the Commonwealth recognised the need to restore stability and balance to the industry.
The joint discussions between the state, territory and Commonwealth governments paved the way for a consistent approach to reforms which introduced thresholds for damages and limited the circumstances in which damages are recoverable.
"More recently we've seen insurance premiums for public liability and professional indemnity, as well as medical indemnity, dropping by up to 17%. A sense of balance has been restored to the insurance industry, and there is renewed stability in the market place
"We are seeing the benefits start to flow to consumers through lower premiums, and access to medical services that were being threatened through unavailable and unaffordable insurance cover. However, there remains a need to continue monitoring and working with the insurance industry to ensure all the benefits of reform flow on to the community.
"These benefits were always expected to be long term and we do have to be patient and cautious. The industry has a role to play in restoring confidence, but loose talk of winding back reform can only unsettle the industry and it will be Australian small businesses, community groups and consumers that would ultimately pay the price in higher premiums."
Media Contact: Carlie Hogan - 6277 7360
TORT LAW REFORM
REPORT CARD
What happened? |
What did the States, Territories & Commonwealth do? |
Insurance industry crisis (2001)
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Commonwealth, states and territories meet to consider responses to the crisis. Agreed on a range of measures to stabilise the insurance industry. States introduce caps and thresholds for damage payouts, and limit the circumstances in which damages are recoverable. The Federal Government established and funded the HIH Claims Support Scheme to assist former HIH small policyholders in hardship. Commonwealth has enacted professional standards legislation, proportionate liability legislation and legislation to introduce caps and thresholds for damages and new limitation periods in relation to claims under certain provisions of the Trade Practices Act. ACCC asked to monitor insurance premiums. |
What did we set out to achieve? |
Have we achieved it? |
More affordable insurance cover for more Australians |
Initially premiums continued to rise, as expected, as the industry recovered from an unsustainable position and returned to profitability. However, recent data shows premiums are coming down. ACCC's most recent report to the Commonwealth found premiums for public liability insurance fell by 15% in the six months to June 2004. Professional indemnity insurance premiums fell by 17% in the six months to June 2004. Average medical indemnity premiums fell by 12% in 2003-04. Follows premium increases of 29% in 2002-03 and 7 per cent in 2001-02. JP Morgan/Deloitte General Insurance Surveys for 2003 reported premiums for public liability insurance rose by 27% in 2003. 2004 survey reported premiums for public and product liability insurance rose by 3% in 2004 and are expected to fall by 5% in 2005 and a further 3% in2006. |
Sustainability and stability |
Companies have returned to a sustainable position. Companies have attributed strong profit growth to improvements in investment income, judicious claims management and premium growth. Without tort law reform, that would not have happened. |
Greater access to insurance cover for more Australians |
Complementing the tort law reform movement undertaken by the states and territories, and facilitated by the Commonwealth, the insurance sector has:
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Finding the right balance between the rights of the insured and the rights of the victim. |
While the number of low level claims has dropped off, people with significant claims for negligence can still sue for damages. Trends in levels of litigation are expected to be clearer over time. The Insurance industry has publicly indicated willingness to consider long term care of catastrophic cases with the States who have responsibility for that policy. |
Where to from here? |
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Continued monitoring of premiums |
Assistant Treasurer, Mal Brough, has asked the ACCC to continue to monitor insurance premiums for a further three years, and report at 12 month intervals. |
Provide better data for the industry to asses risks |
The Government has asked APRA to collect public liability and professional indemnity insurance data through the National Claims and Policies Database. This is in addition to the ACCC price monitoring report, and will ensure wider availability of pertinent data so that premiums better reflect real risks. |
Completing tort law reform |
Mal Brough has introduced the Trade Practices Amendment (Personal Injuries and Death) Bill 2004. There remains a risk that people may use the Trade Practices Act to escape state reforms. This will close that loophole, and complete the package of tort law reforms. |