Ms GAMBARO (10:54 AM) —I want to follow the member for Werriwa's contribution. (Quorum formed) I appreciate the opportunity to finally speak. After the appalling contribution by the member for Werriwa, who not once mentioned the words `medical indemnity', I am pleased to be here today to speak on what we are here to speak about—the Medical Indemnity Agreement (Financial Assistance—Binding Commonwealth Obligations) Bill 2002. The objective of this bill is to appropriate funds for payments in accordance with an indemnity agreement between the Commonwealth and United Medical Protection Ltd-Australasian Medical Insurance Ltd—hereafter referred to as UMP-AMIL.

On 29 April this year UMP-AMIL announced that they would seek via the courts to appoint a provisional liquidator. For around five years, they had weathered the ebbs and flows that characterised the insurance industry since 1994. From UMP's beginnings as the New South Wales Medical Defence Union in 1997, they pursued an aggressive market growth strategy. By 2002, they were the largest national medical insurer in this country. The impact of their demise on medical practitioners was felt most strongly in New South Wales and Queensland where around 90 per cent of medical practitioners were insured with UMP-AMIL.

A survey at the time by Deloitte Touche Tohmatsu and JP Morgan found that the insurance industry had a number of changes over the seven years from 1993 to 2000. Domestic insurance increased at a steady rate and statutory insurance, which includes third-party CTP and workers compensation, also increased on average over this period. However, commercial insurance, which includes professional indemnity, fell in at least four of the years under consideration from the 1994 period. While professional indemnity insurance increased by six per cent in 1994, it fell by two per cent, nine per cent and 18 per cent in the following three years to 1998. Between 1999 and 2001, professional indemnity insurance showed increases of two per cent, 12 per cent and 23 per cent respectively. It is estimated that this insurance will rise by 20 per cent this year.

According to the Deloitte Touche Tohmatsu and JP Morgan survey, these figures demonstrate the fierce competition within an oversupplied commercial insurance market in the late 1990s. The insurance industry resolved therefore to improve its risk-reward position, as this was the most significant factor in the increase in premiums over this period. The survey also notes that, while the increases in premiums in the late 1990s were substantial, average commercial premiums were below the real level paid in 1993.

There would be few who would not argue that the events of September 11 last year had an instant and lasting impact on the global insurance industry. Not only was it the most devastating terrorist attack of our times but also it levied pressure on the insurance industry, initiating a major review of risk-reward positions and stretching resources to unbelievable levels. Entire industries from travel to tourism were affected. In the United States alone, airlines were grounded from a combined slump in tourism and demand for air travel coupled with new pressures on insurance premiums. The result was increased premiums in an insurance industry that was already starting to show cracks in its veneer, particularly since the 1980s and the rise in the number of litigious claims.

On 3 May, the provisional liquidator was appointed and indicated that the priorities would be to determine whether the companies were solvent and had the ability to continue trading. In a statement issued by the Prime Minister on 31 May, the coalition government made public further details of the government's response to those difficulties being experienced in the medical indemnity insurance market. The government put in place temporary arrangements to avert a disruption in medical services when UMP-AMIL was put into provisional liquidation. At the time of the Prime Minister's announcement, further enhancements to the guarantee were provided. The Prime Minister also announced proposals for dealing with unfunded incurred but not reported liabilities, known as IBNRs. These are a particular problem for UMP-AMIL. By dealing with these liabilities, the government paved the way for the development of commercially sustainable medical indemnity insurance arrangements.

Key elements of the government's strategy for ensuring that medical indemnity insurance is made a viable commercial product have been identified. These difficulties highlighted a number of serious problems in the market for medical indemnity insurance, and the government did not step away from these problems. We tried to address them. At that stage, the existing government guarantee covered payments only for claims finalised from 29 April to 30 June 2002 and incidents that occurred between 29 April and 30 June 2002. The government offered a guarantee to the provisional liquidator of UMP-AMIL to enable him to conduct the following procedures. It enabled him to meet claims in the period from 29 April to 31 December, to renew policies on claims made for the period to 31 December 2002 and continue to meet claims that were notified before 29 April 2002 and properly payable in the period of 1 July 2002 to 31 December 2002. This is an extension of the existing guarantee accepted by the New South Wales Supreme Court recently.

The coalition government indicated it would establish a scheme to fund the current IBNRs. Detail of the scheme included the Commonwealth assuming liability for all unreported incidents that occurred under claims-incurred policies where there was not adequate provisioning for these liabilities, and that it would recoup this liability from members of relevant MDOs over an extended period to spread payments and make them affordable. All MDOs will be required to participate to the extent of their unfunded IBNRs. These amounts will be the subject of independent actuarial assessment, and the scheme will be funded by a levy on medical practitioners in those MDOs with unfunded IBNRs. Medical practitioners who belong to an MDO which has fully provisioned for its IBNRs will not be subject to the levy. Details of the levy arrangements will be developed in consultation with medical practitioners and the MDOs, with the aim that they will be affordable and that the amounts will be funded over a period of five years. Medical practitioners will also be required to contribute to the funding of unfunded IBNRs in their MDOs. The scheme will also fund the extension of the guarantee to be provided to the provisional liquidator of UMP-AMIL, as I said, to enable claims against practitioners to be paid.

The government recognises that, unless medical indemnity insurance can be made a viable commercial product, practitioners will not have the certainty they need to continue practising. This means there are a large number of serious problems that have to be fixed. The government has identified a number of proposals and has said it would address these problems. The key elements of those proposals are as follows. It is important in seeking the removal of New South Wales legislation provisions that impede the development of a commercially based medical indemnity market by capping premiums for certain high-risk specialties. It is also important in developing arrangements, including consideration of direct financial support, to ensure premium affordability for doctors undertaking higher risk specialties, and they include the areas of neurology and obstetrics.

Another key element is working with the states to develop a suite of mechanisms that will give insurers greater certainty in calculating the size of likely claims and assist in pricing risk and setting affordable premiums. That will include substantial tort law reform to contain the cost of claims, reduce the need for litigation and encourage structured settlements rather than lump settlements; a range of measures to deal with the more serious, high-cost claims; improved claim management; and better clinical risk assessment. Also, improving transparency in the financial reporting of MDOs and bringing all of the insurance business of MDOs into the prudential framework for general insurers will be very important. As the Prime Minister stated on 31 May, it is the government's firm intention that a new comprehensive framework of measures be in place before 31 December 2002.

The bill before us today is a demonstration of that commitment. As a government we are committed to all Australians having access to a strong, secure, world-class health care system that will care for all Australians no matter what their needs or means. The Howard government are committed to a viable and universally publicly funded health system—Medicare. The coalition are committed to improving the health outcomes of all Australians, including those living in rural, regional and remote areas. Over this financial year, 2002-03, the Health portfolio will receive over $30 billion in budget funding.

In Labor's last year in government, it spent only $18 billion on the Health portfolio. The coalition has continued to reform the Australian health system since coming to office in 1996. In government, Labor was bereft of ideas on how to tackle the challenges of new technologies, changing demographics and their impact on the health of all Australians. Labor had three health ministers between 1993 and 1996, none of whom were dedicated to, or capable of, genuine reform of the Australian health system. In contrast, the coalition remains committed to a high-quality health care system for all and to ensuring that access and freedom of choice are provided by a strong private sector.

The coalition also acknowledges the importance of ensuring that those Australians living in outer metropolitan, regional and remote parts of this country have access to similar standards of health services as those who live in the city. By promoting preventive health initiatives, introducing the use of new technology into the health system and through the provision of generous health and medical research funding, the coalition is ensuring that all Australians experience the best of health. I ask the House to support this bill.