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Thursday, 1 December 1960

Mr CREAN (Melbourne Ports) .- I would like to add a few words to those of the Leader of the Opposition (Mr. Calwell) on this matter. It seems to me that this is the first amendment that has been proposed to the Insurance Act since 1937. This bill covers almost every field of insurance, bar life insurance. Under the Life Insurance Act there is a gentleman known as the Insurance Commissioner who, annually, files a report which gives comprehensive information on transactions in the life insurance field. There seems to be no similar statutory report on general insurance. I have searched the records and I cannot find any document that has to be tabled under the Insurance Act. I ask the Treasurer (Mr. Harold Holt) whether that is the case, and, if it is, whether that deficiency will be remedied.

The only figures that I have been able to get are those for 1957-58, published in the finance bulletin of the Commonwealth Statistician. At page 171, under the heading " Fire, Marine and General Insurance ", a total premium income of £154,000,000 is shown for the year 1957-58. Nearly £30,000,000 of that sum came from fire insurance, nearly £42,000,000 from insurance on motor vehicles - a very significant topic at the moment - and £33,000,000 from employers' liability insurance and workers' compensation insurance. Those three classes of insurance between them yielded about £105,000,000 in premiums. Yet there does not seem to be any coordinated and complete information in this field as there is with regard to life insurance. The only reference that I have seen to other insurance appeared in the report of the Insurance Commissioner for 1959. On page three of his report he stated -

An important feature of recent years has been the developing interest shown by overseas insurance companies in Australia as a field for the transaction of life insurance business.

That has nothing to do with this measure. Then the report states -

In addition the recent move by a number of Australian life insurance companies into general insurance business has resulted in some general insurance companies entering the life insurance field.

I would have thought that general insurance - fire, motor vehicles and workers' compensation, which are covered in the bill - would be an entirely different kind of activity from life insurance. Whilst it might be justified on the basis of competition, the entry of life insurance companies into the general insurance field, and vice versa, seems to be worthy of some investigation, particularly in view of the entry of more and more foreign countries into Australian insurance. Although the total premiums collected from general insurance - about £154,000,000 - are greater than the amount collected in life insurance premiums, it does not seem that this field of insurance is subject to the same degree of analysis as is life insurance.

At page 172 of the finance bulletin I find that of the £154,000,000 which is collected in premiums, £25,000,000, or £1 in every £6, is absorbed in expenses of management. This seems to me to be a fairly inordinate ratio for this kind of business. Out of every £6 with which people believe that they cover a certain risk £1 is absorbed in the expenses of management! This seems to me to indicate that there is a great deal of unnecessary expenditure because there is overlapping in the insurance field by a number of companies which compete for a particular kind of business. The result of this overlapping is not necessarily to give a greater cover or greater security to the insured but rather to absorb a greater part of premiums in unnecessary expenditure on management.

The life insurance report contains details of every life insurance company and gives the ratio between their expenses and their premium income, but no such statistics seem to exist for other fields of insurance business. I suggest that the Government consider appointing somebody in those fields equivalent to the Insurance Commissioner in the life insurance field. On behalf of the Government, he could act as a scrutineer to inquire whether or not the expense rates of some of these companies are excessive compared with the services that they provide. I think that this is of some significance.

On page 171 of the finance bulletin are listed a number of types of insurance including fire, motor vehicle and workers' compensation. Those types account for about two-thirds of the field of general insurance, but general insurance also covers all sorts of other risks such as death of live-stock, which is of some significance, burglary, aviation accidents, and sprinkler leakage. It seems that, apart from a number of specific exemptions, to which the Leader of the Opposition referred, this bill would cover anything except life insurance. In the notes on the clauses which were given to the Leader of the Opposition there is a rather vague explanation. Perhaps the Treasurer might clarify it later. It relates to the specific exclusion of one field of insurance, namely, funeral insurance.

Funeral insurance, which operates under State laws, has become subject to a great deal of criticism because a number of practices which might almost be called rackets have been carried on in that field. I do not know whether it is felt that this subject is adequately covered by State laws but it seems to me that it is not. The people who seek this kind of insurance are usually unfortunate people in receipt of a pension of some kind. Because the Commonwealth funeral benefit is entirely inadequate, these people fear that they will have a pauper's burial and so they contribute to a funeral scheme in order to have a decent burial. Such schemes are specifically excluded from the provisions of the bill.

The Treasurer, I think, said that it was not clear whether funeral schemes were a form of insurance or not. Whether it has been assumed that they are not insurance and so should not be included in the bill I do not know. But this would seem to indicate the existence of a void so far as definition is concerned. If funeral schemes cannot be regulated under this legislation there may be some other way to regulate them under social service legislation. I do not know. However, now that the principal act has been in operation for nearly 23 years, I ask that some consideration be given to the position which insurance of this kind occupies in the community. After all, each year there are paid £154,000,000 premiums, which are subject to investment decisions just as are premiums paid in respect of life insurance, and I suggest that the net should be cast a little wider in order to provide that the same detailed information be published in connexion with the activities of individual companies. I cannot see why individual companies should not be subjected to scrutiny in this direction. At present, the Government is able to compare the performance records of one life assurance company with those of another. We know mat some companies come off rather badly in such a comparison, and I should think that if the same sort of information were required in connexion with insurance in the fire and general field it would be beneficial to those persons who invest in such schemes, because it would prevent too great a proportion of the premiums being absorbed by unnecessary overhead costs.

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