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Tuesday, 22 October 2002
Page: 5616

Senator RIDGEWAY (4:33 PM) —I also want to speak on the report into the public liability and professional indemnity insurance crisis and, more particularly, on the Australian Democrats' supplementary report. Both have come about as a result of a process during which, as Senator Collins has said, 166 submissions were received in relation to the inquiry. The submissions were received from individuals, small business owners, volunteer groups, sporting groups and large corporations. It seems that there is not a segment of the community that has been unaffected by spiralling increases in insurance premiums.

In relation to the Senate inquiry, I endorse the recommendations of the Senate Economics References Committee report, but I also want to raise some issues and recommendations that I believe are developed more extensively in the Australian Democrats' supplementary report. Generally, I believe that the recommendations in the committee's report do accurately address the real problems and, unlike the reforms we have witnessed thus far from state and federal governments, address these problems with a sense of realism. This report presents a very careful analysis of the actual causes of the crisis, an approach that has so far failed to appeal to the proponents of tort law reform.

I want to comment on some of the report's recommendations in relation to the issues expanded upon in my supplementary report. In relation to recommendation 1, while I agree that a national accreditation program for providers of recreational services is an excellent idea in theory, the administration of such a program may well be impracticable. In my view it is therefore vital that the definition of `recreational services', or what are called inherently risky activities, not be so wide as to capture all manner of activities. The Democrats' report recommends that liability should not be limited as a result of fraud, recklessness and misrepresentation, so that users of recreational facilities are not unduly burdened with blame but the relevant safeguards can be put in place. It is very much about getting the balance right—not loading up the users of recreational services to the exclusion of responsibilities that a recreational service provider must also have.

In relation to recommendation 5, the Democrats believe that the functions of a working group to look at the provision of long-term care of the catastrophically injured should be expanded to look into the viability of a no-fault compensation scheme for all long-term sick and injured, not just the catastrophically injured, particularly in a country like Australia with an ageing population. Additionally, whilst I do not endorse the way in which individual rights have been eroded through the latest tort law reform measures, there may be a rationale for removing the claims argument from the equation altogether if there is no guarantee that it will be in the best interests of accident victims. There may also be an argument to remove the insurance industry from the loop altogether and put responsibility back on the government, as it is likely that in the long run the government will bear the burden of costs for those who are seriously injured. A national compensation scheme such as the one operating in New Zealand should at the very least be examined more thoroughly than it has been to date.

In relation to recommendations 7 and 8, detailed data on the insurance industry is necessary to accurately assess the cost of claims and the pricing of risk in insurance policies. The Democrats do agree that data collection in this area should be a priority for the government. The ministerial communique on public liability of 30 May expressed concern:

... that the lack of comprehensive data on claims costs was a significant constraint in the appropriate pricing of premiums by the insurance industry for not-for-profit, adventure tourism and sporting groups.

The Ipp report on negligence also noted the absence of empirical evidence. Despite all of that lack of data, all governments across the country have been prepared to endorse tort law reform as the solution to the public liability crisis. It seems to me that the absence of hard data means that not only is it impossible to be sure that tort law is the cause of the current crisis but also it will be far more difficult to assess the effectiveness of the reform process itself.

In relation to recommendation 12, the Democrats agree that more active monitoring of the insurance industry by APRA is needed, but a commitment from the government and APRA that its existing powers will be used must also be provided. Without first getting this commitment from government, providing APRA with further powers would, in my view, be an exercise in futility. I think that it is also necessary that those monitoring powers be extended to include other types of insurers who have not been caught as a result of government proposals, such as the Medical Defence Organisation and other relevant mutual organisations, keeping in mind that bodies like United Medical Protection were not covered by APRA's monitoring powers.

We also believe that there should be greater independence between the accounting and auditing provisions of the insurance industry. This should include the ability to restrict the length of time that a single auditor can provide services to an insurer without rotation, and a requirement that no one firm can simultaneously provide auditing and accounting functions for a particular insurer.

In relation to recommendation 13, the Democrats support the recommendation for a more effective insurance industry complaints mechanism, recognising that there were almost half a dozen different complaints mechanisms. We would add that the government must ensure that industry harmonisation of those various complaints mechanisms is in place within the next 12 months and is reviewed regularly for effectiveness.

On recommendation 15, the Democrats agree that there is a need for an insurance code of practice and that its content should be revised. The current insurance industry code of practice does not provide adequate sanctions for non-compliance, and there is no guarantee of customer redress. We do believe that the code needs to be given greater promotion or even legal effect. Whilst I appreciate the limits of self-regulation generally, I think that consumers need to be assured that any insurance industry code should at the very least be equal in strength to the bank code of conduct and, therefore, contractually bind companies to the code itself.

So far, government responses to addressing rising insurance costs have laid blame predominantly on the legal system. The most far-reaching reforms have been in relation to tort law reform, limiting the ability to sue and limiting the amount of damages that can be awarded to the injured. This has been based on cases that have featured highly in the media, without understanding that 98 per cent of cases are resolved without recourse to the courts. I think the reforms have not sought to include the insurance industry in the proposals. I believe that they have gotten off scot-free. There has been little or no discussion on what measures should be adopted to ensure that accident victims will be provided for if they are injured as a result of the negligence or carelessness of someone else, nor has there been any discussion on what measures should be put in place to ensure that the community provides a safe environment, whether it be in the public, private or professional domain.

The Democrats' supplementary report tries to capture many of those issues as well as others that have not been developed as sufficiently in the committee report and the narrow debate that has been had to date. Perhaps these issues are going to come up over the course of the coming weeks in the range of bills that have been put forward to deal with these issues. Perhaps they are issues that can be taken up by the government and, more particularly, by the minister, because I think that the insurance industry, quite frankly, has gotten off lightly in relation to carrying any of the burden for the cause of increases in premium prices for consumers. I do not believe that the balance has been properly struck.

The final thing I want to say is that, whilst we put forward this supplementary report, I think the government does need to come up with some answer to the references committee, which has conducted a far-reaching inquiry and has tried to establish the causes of the spiralling increases in prices in the insurance sector. Most of all, I think there is an incumbent obligation upon the government to respond at the very least. Perhaps the minister might be able to do that.