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Thursday, 18 October 1984
Page: 1998

Senator JACK EVANS(5.08) —I wish to speak to one section of the report of the Insurance Commissioner. It refers to item 7 regarding section 113 of the Insurance Act. It is a section which, unfortunately, contains a loophole which may have been used to the disadvantage of a lot of people in the road transport industry. I have taken up this matter with the relevant Minister but I have had a less than satisfactory response from him. It is not that he is uninterested but he has indicated that he lacks the power, and the Insurance Commissioner lacks the power, to take any steps relating to section 113. I will read a brief extract from the Minister's letter, of which he has provided me with a copy, which was addressed to a firm of accountants in Adelaide:

Under the provisions of section 113 procedures exist for agents operating within the terms of that section to place insurance business with unauthorised overseas insurers provided, inter alia, that the person to whom insurance cover is to be granted under the contract has acknowledged in writing that that cover may be provided in whole or in part by an unauthorised overseas insurer. In effect, this condition is designed to afford insureds with an opportunity of considering the possible implications of having insurance placed in the overseas market as distinct from insurers authorised under the Insurance Act and subject to the supervision of the Insurance Commissioner.

The loophole concerning the transport industry is important because the majority of road transport operators are covered by insurers operating within the terms of section 113. Where an insured insures with a registered Australian insurance company the Insurance Commissioner has control over that company. He can ensure that there is an adequate asset-premium ratio and regulate its business conduct. However, where an insured is insured by an Australian underwriter or another body with an overseas insurer under section 113, the Insurance Commissioner cannot ensure that the asset-premium ratio of that overseas insurer is adequate and he cannot control its business practice. Even if the Insurance Commissioner knows or suspects that such an overseas insurer is not a stable or prudent insurer he does not have the power to act.

Authorisation under section 113 does not indicate the approval of the Insurance Commisioner for such an overseas insurer and that is the weakness. The industry may be aware of what authorisation under section 113 means but the insured public is not aware. I believe that the Government has a responsibility to make Australian insureds-the people who are insured under section 113-aware of how this section operates and that authorisation under it does not imply that respectability has been given to the overseas insurer by the Insurance Commissioner. That is the crunch. I therefore ask the Government either to change the Insurance Act or to advertise nationally to educate those people who would be insured under section 113. At the very least, such advertisements should comprise each of the four points I have outlined in my speech.