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Tuesday, 22 October 2002
Page: 5650


Senator RIDGEWAY (7:35 PM) —Firstly, I would like to highlight a few recent events that have brought us to where we are today in relation to the national insurance crisis. Even putting aside the impact of September 11 on the global insurance industry, a number of local events highlighted by the media added panic, disruption and dismay to the general public's understanding of the current insurance crisis. On 15 March last year, HIH filed for voluntary liquidation. As it was the largest underwriter of public liability policies, this had a significant effect on the closure of community events. On 5 November last year, there was much media attention on the damages payout of $13 million to Calandra Simpson, who suffered tetraplegia as a result of a botched forceps birth.

On 3 May this year, and leading up to this date, the provisional liquidation of United Medical Protection caused panic throughout the health industry and certainly disrupted the delivery of essential medical services. On 13 May this year, there was also widespread reportage of, and public outcry at, the outcome of a negligence claim against the Waverley Council that resulted in a damages payout of $4 million dollars. The attention devoted to this topic has since spiralled and has maintained prominence in the media and in people's minds as the insurance crisis has developed, not only because this issue now affects all of us in some way but also because the fundamental issues underlying this crisis generally remain unaddressed.

The New South Wales government's response to the issue was based on criticisms of the legal system and the blow-out in the cost of claims. However, sweeping statements of reform were delivered without any real statistical evidence in this area to back them up. Premier Carr on that occasion led the charge on a wave of reforms that were essentially designed to cure the insurance crisis and ensure the availability and affordability of public liability and professional indemnity insurance. It was always seen as a noble task, but what was the premise for making such sweeping tort law reforms? It seems to me that there should have been a commonsense approach which would begin with the question: what was the cause of the current crisis? Unfortunately for the people of my home state of New South Wales and for the rest of the country, it seems that commonsense was not the motivating factor behind these insurance solutions.

What do we really know about the blow-out in the costs of claims themselves? We know that there are a handful of cases that appear to be outrageous in terms of what we understand to be justice in particular circumstances. However, we also know that there are competing statistics regarding claims size and number. According to Insurance Statistics Australia, there has been no overall increase—and perhaps some reduction—in claim numbers in more recent years. For instance, in 1996 there were approximately 10 claims per $100,000 premium. In 2000, there were approximately eight claims per $100,000 premium.

At the Ministerial Meeting on Public Liability Insurance held on 30 May, ministers agreed that the lack of comprehensive data on the costs of claims was a significant constraint in the appropriate pricing of premiums by the insurance industry for the not-for-profit sector, adventure tourism and sporting groups. The Ipp report on negligence that came out of that process also noted that there was a lack of empirical evidence in relation to claims costs. Despite the lack of data, all of the governments and states have been prepared to endorse tort law reform—in essence, limiting people's right to sue and the size of payouts—as the solution to the public liability crisis, on the assumption that it is the primary cause of the problem.

I guess the thing that needs to be raised is that the absence of solid claims 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 difficult to assess the effectiveness of the reform process itself. Whilst there has been no time wasted in moving to limit individuals' rights, regardless of the lack of claims data, the community has not been guaranteed anything in return. There has not been any discussion on what measures should be put in place to encourage a safer community or how the future medical and financial needs of victims of serious injury would be addressed and how the party responsible for the injury will be deterred from future negligent acts or omissions.

Today's tabling of both the Senate Economics References Committee recommendations and the Australian Democrats' supplementary report on the national insurance crisis again highlights these issues as well as the pressing need for a greater role for the insurance industry in any solution to the current situation. The state and federal governments have not only failed to come up with a solution that addresses the crisis but also left out the role that the insurance industry needs to play. I think that the insurance industry have come out of this as privileged in being overlooked as having some responsibility for those things that have caused the current crisis.

From the creation of UMP—the largest medical insurer in Australia, with coverage of about 60 per cent of medical practitioners nationally and 90 per cent in New South Wales alone—until its collapse, it pursued an aggressive, irresponsible and unsustainable market growth strategy that undoubtedly contributed to the state it is in today. Whilst the provision of medical services is vital to the health of all members of the community, pressure from the AMA and the government's attempts to bolster UMP—an unregulated, unscrupulous insurer—highlight the quick-fix solutions that have typified the current government. At the same time, other non-specialist medical professionals, such as practitioners in Aboriginal medical services, are experiencing increases in professional indemnity costs of around 150 per cent.

Another shameful example is the fact that there is no insurance policy on the table for independent midwives. Midwives in this country attend 98 per cent of all births, yet childbirth medical specialists, who attend 10 per cent of births, look to be in line for special status in the government's quick-fix solution. I believe that it is imperative that the focus here be on long-term, broad-ranging solutions rather than on supporting non-viable insurers for some groups and ignoring the plight of other equally viable and important professions. At the end of the day, this affects all of us.

If the government cannot provide guarantees for the whole of the community to overcome the current insurance woes, then the government must ensure that the insurance industry is also part of that solution. The government has to restore some balance to their solution so that the winners are not just the big end of town, such as UMP, the AMA and the insurance industry. The great danger that I believe we now face is that the tort law reforms that have been implemented will have a major impact on the ability of the injured to realise their long-term financial and medical needs.

The problem is that the move to solve the insurance crisis in this way shifts all responsibility away from the negligent and towards the public purse and the community. Without necessary protection and safety standards for the community, it seems that insurance pricing may very well be the least of our problems. We have to ensure that we have mechanisms in place that encourage people to minimise the risk of accidents and that those who are injured are properly cared for. Shifting the blame to the individual so that the insurance industry is better off in the short term does not address the real causes and problems that are currently facing the community.

Going down the narrow, short-sighted path of tort law reform without looking at necessary safeguards and industry involvement has the potential to create more problems than it fixes. It may make our current complaints about insurance premiums seem trivial at the least. Solid, wide-reaching reforms, such as those outlined in the Democrats' supplementary report and, of course, the report following on from the Senate Economics References Committee inquiry, need to be put in place to ensure a future safe environment, whether it be in the public, private or professional domain.