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Tuesday, 22 October 2002
Page: 5619

Senator COONAN (Minister for Revenue and Assistant Treasurer) (4:49 PM) —I must confess that I have not had an opportunity to read the report on public liability and professional indemnity insurance that is being debated but, if the contributions of Senators Collins, Webber and Ridgeway are any indication of its quality and depth, it will probably remain unread. The contributions that have been made by the honourable senators indicate that they must have slept fitfully through about the past eight months and been oblivious to three ministerial meetings between the federal government and all of the state and territory governments. All of those governments are Labor governments, apart from the federal government, which took the leadership role in this. Unanimous communiques came out of each of those meetings and endorsed a range of initiatives that have been systematically implemented throughout this year.

We are starting to see insurers that had previously left the market actually coming back into the market. These insurers had withdrawn their capital because of skyrocketing claims and a lot of other problems in the international market. The steps that have been taken by the federal government and by state and territory governments have seen insurers come back into the market and show that they are willing to write insurance at an affordable price in those jurisdictions that are implementing tort law and other law reforms. Suncorp, for instance, have come back into the market in New South Wales. IAG have indicated that they are going to come back as soon as the second tranche of tort law reforms is introduced in New South Wales. And the Insurance Council of Australia has implemented a co-insurance pool for not-for-profits and for community groups so that, while the rest of the reforms can be implemented, some much-needed insurance at an affordable price will be available.

I will be very interested to see what the report recommends we do about international conditions. I will be delighted to see what those senators who prepared this report want to do about the downturn in the international market. When you look at the drivers of the increase in insurance premiums, you find that the pressure is there not only because of high cost claims but also because the international market has had a huge impact on reinsurance. For many years insurance companies could supplement their position with investments but, with the downturn in the investment market, they could not rely on that any more to supplement their returns and so they withdrew from the market. There have been some fairly uninformed suggestions about the ACCC pricing and monitoring—

Senator Jacinta Collins —You used that for the GST.

Senator COONAN —Senator Collins, you might like to learn something.

Senator Jacinta Collins —You interjected!

Senator COONAN —The ACCC enforcing pricing controls on insurers is probably one of the less helpful suggestions of this report, if in fact it is a suggestion. It was a bit hard to follow what was rhetoric and what was a recommendation. The ACCC has made the very clear point publicly in its insurance pricing review, which I hope the committee read—there have now been two of them—that controlling insurance prices is unlikely to be effective. The ACCC has said in its pricing review that controlling prices is unlikely to be effective.

Senator Jacinta Collins —Consumer interests are not being addressed.

Senator COONAN —Senator Collins, you think you know better than the ACCC, but I do not think that you are going to be very effective. As the ACCC has pointed out, you can control prices but you cannot control supply. How are you going to get insurance companies to write premiums at a loss? No business will continue to provide any product at a loss; they will not.

Senator COONAN —That is why they left the market, Senator Collins. It is not a very difficult equation. We need to implement the reforms so that the insurance companies will come back into the market. Perhaps the most ignorant statement of all was the suggestion that there is some great benefit to be had in the New Zealand scheme, which currently has an unfunded liability in the order of $NZ9.3 billion. That is not very responsible and I am sure that, if the Senate thinks about that for more than a moment, it will realise that, to be suggesting a national compensation scheme, it needs to have a hell of a lot more information than is available.

The ACTING DEPUTY PRESIDENT (Senator Chapman)—Order! The time for the debate has expired.