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Thursday, 14 February 2002
Page: 353


Senator CHERRY (5:14 PM) —That was a very disappointing contribution from the government. It is extraordinary to hear from one of our more esteemed legal members of the chamber that this government does not have control over matters of insurance. The little document in our drawers, the Australian Constitution, in section 51(xiv) makes it quite clear that the federal government has control over insurance matters.


Senator Brandis —That is not right, Senator Cherry. You don't know what you are talking about. That provision has been interpreted by the High Court several times, and it does not give the Commonwealth the power to regulate premiums.


The ACTING DEPUTY PRESIDENT (Senator Crowley)—Order, Senator Brandis! You have already spoken.


Senator CHERRY —That will certainly be news to Senator Patterson, who is currently regulating private health insurance premiums. The key thing is that the Commonwealth does have a responsibility, and a legislative responsibility, not just in the area of insurance but also in trade practices law, funding community organisations, taxation and a whole range of other areas. What we have seen over the last three to four weeks has been the most pathetic piece of Pontius Pilate finger pointing from a range of government ministers who are desperate to get themselves out of an incredibly complicated situation and flick pass the issue. I was astounded and disappointed by the performances of Mr Hockey and Senator Coonan over the last couple of weeks. But when Mr Hockey first made his proposal that we adopt the New Zealand Accident Compensation Commission's policy with its $6 billion unfunded liability as national policy, Senator Coonan correctly pointed out that this issue is very complicated, that you cannot go around interfering with people's legal rights and a whole range of other issues. Three weeks later—I do not know who had talked to whom—suddenly she puts out a press release which makes it abundantly clear that, in her humble view, `the state governments have a clear and unambiguous responsibility in this area,' ignoring the impact of the Trade Practices Act, which, of course, regulates waivers and unfair pricing, ignoring section 51(xiv) of the Constitution and ignoring the Commonwealth's overriding regulation of prudential supervision of the insurance industry. I am disappointed by this. I am disappointed by the reaction of probably all governments in Australia over the last couple of months, but I have been pleased to see a lot of catch-up happening over the last couple of weeks.

I commend particularly the Western Australian government with their five-point proposal released last week, still in proposal form. The Queensland government is probably still ahead of all the other governments in getting things up and running—they have actually picked up P&C associations and given them government coverage. I am very apprehensive about what impact, what resolution, what solution we are going to get out of this national summit if all it is going to consist of is an increasing bevy of federal government ministers. We now have Senator Kemp—talking about sport—Mr Hockey and Senator Coonan all interested in the issue, all lining up and pointing their finger at the states across the table and saying, `It's your responsibility.' The states are probably pointing their finger back and saying, `We're not going to do anything until the ACCC tells us what's going on.'

We should talk briefly about the ACCC's review of general insurance. The ACCC's review of general insurance is not going to tell us why premiums on public liability have risen by 200, 300, 400 or 500 per cent. I know the reason; I have asked them. It is not part of the review. They are looking at the general issue of general insurance; they are not going into companies to ask what is happening. I concede, as I am sure everyone in this place does, that public liability insurance premiums had to go up. In the year 2000, according to APRA—a federal government body, not a state government body, which prudentially supervises insurance companies—payouts on public liability and product liability were $1.18 billion and premiums were $883 million—that is, a shortfall of $300 million. That is not a very good way to run business, but that is how the insurance companies have run their public liability books for the last three years. It was clear that premiums had to go up. To ensure that premiums exceeded claims, they would have had to go up by at least 35 to 40 per cent and probably a bit more. But that is not what we have seen in any of the sectors that we have been talking about. What we have actually seen is junior soccer clubs facing premium increases of 328 per cent; kindergarten associations which have had no claims in 40 years having an increase of 130 per cent; community festivals facing increases of between 100 and 600 per cent; community halls facing increases of 300 to 400 per cent; and in sporting areas, waterskiing federations and clubs not being able to get coverage for love or money. The tragic stories go on and on. I do not know what the government is going to say to the good residents of Mitta Mitta in Victoria who have now had to cancel the Mitta Mitta Muster which was due to take place on 10 March. Why? Because they could not get coverage from any insurance company for a reasonable price.

I had correspondence only yesterday from the Yetholme Progress Association outside Bathurst which runs a small community hall. Their premium has gone up from $300 to $2,000 this year and they are wondering whether their hall committee can continue to run their hall effectively in the future. I suspect that quite a few community halls are going to be closing over the next couple of months unless this government—and I am pleased to see Senator Boswell in the chamber today—does something about the issue of public liability insurance for community halls. The Veresdale scrub hall near my family's farm had to cancel its Boxing Day dance because they could not get insurance for it. They were told that the insurance company would insure the hall as long as nobody moved while they were in the building—a dance without dancing.


Senator Boswell —Where was that?


Senator CHERRY —Veresdale.


Senator McGauran —Has anyone mentioned the lawyers?


Senator CHERRY —I am getting to the lawyers. The point I am trying to make, Senator McGauran, if you were listening carefully, is that I concede that there has to be an increase in premiums and that increase in premiums is probably justified at 35, 40 or maybe 50 per cent but not at 500 per cent, which is what the Yetholme Progress Association is facing, not the 600 per cent that the community festivals like the Herberton Tin Festival are facing, not the 300 per cent that junior soccer clubs are facing, the 1,000 per cent that the Gymnastics Federation are facing. These are not justified increases. They do not reflect the risk profiles of those organisations. They do not reflect their claims history. One of the great difficulties we have here is that we do not have the proper information to apportion blame fairly between the lawyers and the insurance companies. I am concerned that this government is letting the insurance industry off the hook—that is what you are doing. You are trying to flick pass the issue back to the states, back to the common law, back to the lawyers and ultimately—more importantly than the lawyers—back to the plaintiffs and people who have suffered negligence and damage. You are trying to inflict it back on the victims, but you are not looking at the insurance industry itself. If we are going to have a proper, comprehensive, full and appropriate resolution of the issue of public liability insurance, we have to start by asking: are the premium increases, in their entirety, justified? That means asking the ACCC because that is a federal body. Your clear and unambiguous responsibility is to ask the ACCC to go in and justify each and every one of these premium increases. That is what we need. We are looking at the closing of dozens of community organisations, sporting clubs, festivals, shows, tourism ventures, the Big Banana—which is in New South Wales rather than Queensland, I am terribly sorry. We have the Big Pineapple—


Senator Conroy —Is it on the border? Oh, the Big Pineapple; I am sorry.


Senator CHERRY —No, the Big Banana is in New South Wales. The whole adventure tourism industry is under threat in this country, because of public liability. We have to go back and ask, almost premium by premium, whether premiums are justified at their current levels. That is question 1; that is a federal responsibility. Question 2 then becomes: what do we do about the lawyers? That is clearly a state and federal responsibility—but predominantly a state one. We have to talk about that. We have to look at the contingency fee arrangements. I have no doubt about that, although Slater and Gordon will probably never talk to me again for saying that. We have to go back and look at advertising.


Senator Conroy —I want to know why they were talking to you in the first place.


Senator CHERRY —They are a very good, eminent firm. We have to look at the whole issue of risk management. Unfortunately, when you are talking about sporting and community groups, that is an area where they have to get funding to do it because most of these organisations are funded. That again is a federal responsibility, because risk management involves training volunteers how to reduce the risk in terms of running an event, a sporting organisation or sporting event, a festival or whatever. You cannot expect organisations to pick that up, do the training and work out the issues on their own on the shoestrings they are currently running on. Volunteers are running away from organisations in this country because of the complexity of the GST, the complexity of insurance and all of the other extra legal niceties being thrown on the people who run organisations.

I met yesterday with sporting industry representatives, and they want to see risk management and training for risk management for their volunteers. That becomes a government responsibility. I want to make sure that, when we start looking at the issue of community grants from the federal government to community welfare organisations across the country, we recognise that this year, more than any other, those organisations are losing a huge chunk of their grants in paying insurance premiums. That again is a federal responsibility. There will be budget implications of public liability insurance for the Commonwealth in terms of ensuring value for money from its grants, and the government has to recognise that ahead of the federal budget. I raised this with Senator Vanstone last September, and I am pleased that she has assured me that she will continue to monitor that issue.

We also have to start looking at some of the other areas. In addition to looking at risk management, the legal system and the insurance industries, we have to look at practices within the insurance industries to make sure that, if an organisation puts in place a decent risk management strategy, it gets its discount. We have to ensure that, if an organisation has not made a claim for 40 years, it gets its discount. Why should a kindergarten that has never made a claim in 40 years be subjected to a 130 per cent premium increase? That does not reflect their risk profile. We have to go back and look at the practices of the insurance industry—and that is a federal responsibility. We have to ensure that the discounts are there, that the risk is calculated and that the risk is reflected in the premium, because that is not happening at the moment.


Senator Boswell —This is a childish speech. What—are we going to write the premiums?


Senator CHERRY —I think you are going to have to this year.


The ACTING DEPUTY PRESIDENT (Senator Crowley)—Order, senators! It is very noisy and, if you all interject at once, none of you will make Hansard. So, if you wish your wisdom inscribed, one at a time please.


Senator CHERRY —The difficulty we have is that the market for public liability insurance in Australia at the moment is incredibly flawed. With HIH leaving the industry, the biggest player has left. A number of other players, including Suncorp Metway, have also left the industry.


Senator Boswell —Why?


Senator CHERRY —Because they could not make money on their books. This has left fewer people in the industry, and that means they are able to charge whatever they want. This is the fundamental difficulty we currently have. From that point of view, the regulators should be in that industry like Flynn, trying to make sure that there is value for money in premiums, and the federal government is not doing that. Our communities are suffering, our sporting groups are suffering, small business is suffering, the bush is screaming—and it is a tragedy that all we hear out of Senator Coonan is `It is a clear and unambiguous responsibility for the states.'

I would really hope to get more. I hope that, ahead of the summit we are having in a couple of weeks with an as yet unspecified invitation list, the government recognises and starts producing a little bit more information on what it is going to do to ensure that it cleans up its own backyard and that the issues under its responsibility are acted on. I also publicly urge the government to extend its invitations list—to make sure the Australian Local Government Association is represented, because they host all the facilities the sporting clubs are using; to make sure that the sporting industry peak bodies are represented; to make sure that the Australian Council of Social Services, representing the community sector, is represented; to make sure that small business groups like COSBOA are represented and to make sure that the Tourism Council is represented— because we need to make sure that all the different needs and concerns of these groups are properly addressed.

I urge the government to make sure that, rather than having the finger point across the table about which politician is responsible, we sit down and come up with a solution. I want to see a solution; the Democrats want to see a solution. We are happy to work with Senator Coonan, and with whichever other minister has responsibility in this area, to come up with a solution. We have quite a few ideas that we are working on, and we have been in contact with literally hundreds of community and sporting organisations to develop our position. We are happy to feed that into this summit, or into whatever process you develop, and we are keen to do it. It has to be done, because we are about to lose a huge chunk of what makes our Australian community vibrant, interesting and healthy.