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Thursday, 14 June 1984
Page: 3084

Senator WATSON(10.22) —I direct my remarks to the Insurance (Agents and Brokers) Bill 1984. I remind the Senate that when the present Attorney- General (Senator Gareth Evans) introduced his private member's Bill back in October 1981, relating to insurance agents and brokers, it was largely modelled on one proposed by the Law Reform Commission. At that time it had my support. In fact, I was only one of the few senators, including Senator Missen, who at that time gave their support to that Bill. Last year the Government introduced another Bill, called the Insurance (Agents and Brokers) Bill 1983. I believed that that was a very good Bill and so did my colleague Senator Alan Missen. Unfortunately, Senator Missen is unable to be with us tonight and he has asked me to convey to the Senate his support for the present Bill. I cannot give my support to the Bill before the Senate as I could have given my support to the 1983 legislation, because this Government has sacrificed principle for expediency.

What has happened is that the insurance gurus have got to the Australian Labor Party. The Government did not even bring in amendments; it introduced a completely new Bill. It is really a disgrace to the Government. So the Government is really trying to get some legislation on the statute book. This Bill will increase the amount of red tape and paperwork but will not effectively help those who are really in need and those to whom the 1983 Bill was directed to protect. I just wonder why we are wasting our time in having to debate a Bill which has so little substance and so many loopholes that it will not catch the very people it is designed to catch.

We have heard high-falutin stories about the way the Labor Party intended to wipe out tax avoidance. We have heard the rhetoric of honourable senators opposite about trying to clean up the insurance industry. I pointed out in the debate on the Insurance Contracts Bill that they have miserably failed to do that. They have failed to give the protection where the protection was needed. They have simply put something on the record book to say they have an interest; they have done something. But they have not gone far enough. They have not done much at all. The rhetoric sounds good. The purpose of the Bill is to regulate the activities of life and general insurance brokers and, to an extent, life and general insurance agents. Its purpose is to seek to ensure that these agents and brokers meet professional standards. We all agree with this, but the mechanisms for achieving that are not provided in this Bill.

I think it is important in any legislation of this kind to make sure that the average Australian is not being ripped off by unscrupulous operators who give the decent people in the business a bad name and a damaged reputation. The supposed tenet of this Bill is to protect those in society who are unable to do so themselves in relation to insurance business. All this Bill is doing is presenting to the people and to the Parliament further red tape, further government intrusion. I would have welcomed that intrusion had it been adequate, had it been designed to meet the purpose for which the rhetoric says it was designed.

Senator Robertson —Amend it.

Senator WATSON —The Government was not even game to amend it. It completely re- wrote the 1983 Bill. That 1983 Bill would have had a wide measure of support on this side of the Senate. I think people in the industry, people outside, will really despise the Government for what it has done. The public will receive little assistance as a result of this Bill.

Let us look into the background. I think this is important because the background indicates the need for proper legislation in this area. We are not getting proper legislation tonight. The history of events in the insurance industry has, I believe, contributed to the need for proper legislation in this area. In recent years the insurance industry has undergone periods of crisis and uncertainty, the effects of which have been to disrupt what would have been almost a monolithic structure in every sense of the term. Britain suffered from some insurance company failures during the 1950s and 1960s largely because the body responsible for serious supervision of the industry, the British Board of Trade, was an inadequate mentor and monitor of the trends within the general insurance industry. The insurance company failures occurred largely because of the undercutting of premiums in order to attract custom. The end result, of course, was that income failed to cover expenditure. Coupled with poor investment, it often ended in insolvency and bankruptcy for some companies.

But in Australia in the post-war era insurance was a boom industry, the growth of which was quite amazing. The market expanded at a rate greater than that with which the industry could really cope. A large untapped market existed for overseas insurance companies to tap if they so desired. The first overseas insurance company to set up in Australia was the Insurance Co. of North America. It did so at a time when there was virtually no limitation on companies setting up in Australia. Insurance companies in Australia had generally maintained a fairly close liaison with one another and on the basis of historical knowledge, gained industry wide, completed a catalogue of recommended premiums to be charged for the various insurance risks. This system worked relatively well and helped to keep the industry stable.

The influx of overseas companies served only to disrupt the industry. In their eagerness to be competitive they laid the foundations for their own inevitable collapse. What happened was this: Quite erroneously, a feeling arose among some companies about the universal schedule of recommended fees. It must be remembered that the recommended fees constituted a monopoly, a contravention of some sections of the Trade Practices Act. This led to a dismantling of the fee structure based on a century of knowledge and was, in my view, an absolutely catastrophic move.

Debate interrupted.