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Thursday, 14 June 1984
Page: 3082

Senator HILL(10.10) —I will deal firstly with the Insurance ( Agents and Brokers) Bill 1984. This Bill has arisen from report No. 16 of the Law Reform Commission which was tabled in 1980. It resulted from a reference of the former Liberal Attorney-General, the Hon. Bob Ellicott, QC. The report dealt with the regulation of insurance intermediaries. The Senate will be aware that the Commission published a subsequent report on the law relating to insurance contracts, a report which we dealt with recently. In its report No. 16 the Law Reform Commission recommended regulation of insurance brokers in the form of financial controls and compulsory professional indemnity cover. Very real concern has been expressed at a number of financial collapses of insurance brokers which left those who thought they were insured without cover. This has occurred where premiums have not been paid to the insurer and the broker has not been acting as an agent for the insurer.

In fact, in law the broker is in a somewhat unusual position in that he should owe his responsibility to his client, the insured, although normally he is paid by the insurer. So in these cases potential exists for a clash of interests. Furthermore, what the insurer does with the premium has not been regulated, unlike in the case of solicitors and other professionals who as we know are obliged to place clients' money in trust accounts and otherwise deal with such moneys only in accordance with the instructions they receive from their clients.

The Law Reform Commission recommended an amendment which has been adopted in this Bill that insurers should be responsible for the conduct of their agents, who should operate only under written agreements. Broadly, all insurance intermediaries will be treated that way under this Bill unless they are registered under Part III of this Bill as brokers. Registered brokers are then regulated in their dealings with premiums.

The Bill also contains a notification regime so that a prospective client is aware of fees charged or upon request any commission received from an insurer and any association that exists between the broker and the insurer. This is aimed, it is said, at ensuring that the client is adequately informed of relevant information.

It will be recalled that the previous Government did not propose to act on the Commission's report. The Senate will remember that it opposed a private member's Bill which was moved by the Attorney-General (Senator Gareth Evans) when he was in opposition. It was a private member's Bill to implement the recommendations of the Commission's report. The previous Government did so because it believed- the Opposition still believes-that on balance the need for greater intervention and greater regulation has not in fact been proven. Losses of premiums referred to by the Commission amounted over a period of 10 years to $7.25m which, on the face of it, seems a considerable amount of money. But when one investigates further one finds that that amounts to less than 0.1 per cent of business turnover.

The view of the Opposition is that in many ways our society is already over- regulated. The onus must be on those advocating further intrusions to justify the need. Further regulation means further costs, which mean higher premiums. That the Opposition seeks to avoid. That does not mean that the Opposition is not concerned about the relatively small losses resulting from insolvencies. Losses hurt individuals and, as I indicated, that does cause the Opposition concern. But the Opposition believes that for that small evil to the remedied the better course to be advocated is that of self-regulation.

The facts of life now, however, are that the industry became aware that it was to be regulated and negotiated with the Government on the Insurance Contracts Bill 1983, which was brought down in the Senate, I think last November. The Government accepted many of the representations that were made by the industry and, in fact, took the somewhat unusual course of action of, rather than amending its Bill of last year, introducing a new Bill into the House of Representatives incorporating what otherwise would have been amendments to the original Bill. So in this case we are not sure exactly how many changes have been made. We recall that recently in relation to the Insurance Contracts Bill 1983 we had some 60 to 70 amendments. To one who has tried to make a comparison between this new Bill and the one that was put down last November it appears that there have been just as many amendments in this case. Unfortunately for senators, the way the Government has decided to proceed with this matter makes it almost impossible to find out exactly what has been changed.

Some of the changes that can be perceived, however, appear to be improvements. There were areas in the November Bill in which the Opposition believed it saw shortfalls to which it would have moved amendments during the second reading debate. However, many of those aspects have been taken up. The Opposition commends that. Obviously, therefore, there will be no need for the Opposition to move those amendments during this debate. In other instances it appears that the Government has accepted advice from the industry, which has surprised the Opposition because in some ways it has not really done justice to those who argue for regulation of this industry. What it has amounted to is a watering down. That is a process that is now familiar to us because it is exactly what occurred in relation to the Insurance Contracts Bill 1983. I remember that some of us spoke when that Bill was being considered only a few weeks ago and said that in many instances the small business person and the consumer, who was to be particularly protected by that legislation, had in fact been sold out by the Government's amendments.

It appears that this Government is simply taking the reports of the Australian Law Reform Commission, putting those reports down in the form of a Bill in the Parliament, then seeking representations from industry and determining with industry what changes will be necessary to avoid major objection. In some ways that can be said to be a sensible process of consultation, but in other ways it results in legislation that amounts to the lowest common denominator. It means, in fact, a watering down as the Bill no longer serves the purpose for which it was introduced. I think that later during this debate my friend and colleague Senator Watson wants to take up a number of instances of where that has occurred in this Bill at the expense of those who were to be protected by its introduction.

Apart from that methodology which we criticise, we are concerned by other aspects. In particular, we are concerned that State insurance companies will not be covered. We know that it is not possible simply to regulate to cover State government instrumentalities in this way. However, the result can mean unfair advantage to State government bodies at the expense of private enterprise. That, of course, is something which we in the Opposition oppose. The Treasurer (Mr Keating) has said that he is negotiating with the States. We received that assurance also with regard to the Insurance Contracts Bill. Whilst we are pleased to hear that he is negotiating, we express cautious concern because it may well be the case that such negotiations continue for a long time and simply do not produce any worthwhile result.

As I have indicated, the amendments which we were going to move are now no longer necessary. In summary, therefore, although we would not have taken this course of action and we would not have proceeded with this Bill, we are resigned to its inevitability. We do not support the Government's action but we will not be dividing on the issue.

I will make one further point. We on this side of the chamber do not accept that the recommendations of the Law Reform Commission must be accepted in all cases. We say that the Commission must not replace the role of government or of this Parliament. However, in saying that, we do want to indicate that it does not mean that we do not recognise the major contribution to the subject matter of this debate that has been made by the Commission in its report No. 16 and the contribution that has been made by all those who contributed to that report. That is all I wish to say in relation to the Insurance (Agents and Brokers) Bill .

In relation to the Life Insurance Amendment Bill 1984, we in the Opposition accept that this is a Bill to amend the Life Insurance Act of 1945 to effect a number of changes consequent upon the provisions of the Insurance Contracts Bill 1984. As the Senate knows, we have lost that debate already and therefore there seems to be no point in opposing the simple consequential amendments that are contained in this Bill, and the Opposition will not oppose them.