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Tuesday, 16 November 1976

Mr BRAITHWAITE (Dawson) - Speaking to the Insurance (Deposits) Amendment Bill, it is interesting to note that it is reported in the last Insurance Commissioners report that the amount that is being held at the moment on deposit in connection with this Act is almost $43m. This total is made up of various amounts in respect of many companies. The maximum amount for a foreign company is $200,000 and the maximum amount for an Australian company is $160,000. This Bill when passed will allow the machinery to repay a considerable amount of this $43m back to the insurance industry. In doing so it must supply a certain amount of liquidity to an industry that no doubt could do with it at the moment.

The fact that this Bill has the support of both sides of the House is, as has been said, a reflection on the success of the Insurance Act of 1973. The opening paragraph of the Commissioners report states:

By 30 June 1976 the Insurance Act 1973 .... had made a major impact on the Australian insurance industry ... . One aspect has been the reduction in the number of insurers legally entitled to write business in Australia from nearly 400 prior to August 1974 to 2 14 at 30 June 1976.

These figures are rather significant. While they do show a reduction, I believe that the 214 insurers that remain in the business and were authorised by that Act as at 30 June 1976 were dealing from a position of strength that possibly did not exist before. In fact it is becoming evident that the Act that supersedes the Deposits Act is probably a better control and effects a better oversight for the security of the depositors than did the Deposits Act. I think that this is generally admitted within the framework of the Minister's comments in his second reading speech.

It is interesting to note that a regulation has been effected to extend the time of this Act for another 3 years, indicating that hopefully by 1979 the necessity for this Act will be no longer there, that the Act can be phased out and that the strength will return to the Insurance Act 1973. One can read the figures and say that the industry must have more solidarity now than it probably had earlier in the 1970s. But when one also reflects on the fact that the industry has gone through a period of the greatest pay-out for any catastrophe in Australia's history- the cyclone Tracy at Darwin- these figures are all the more significant. The figures from the Commissioners report indicate that cyclone Tracy cost the insurance industry that was established in Australia some $76m and that it cost overseas insurers $ 123m. In fact, the amount of $76m left only some $6.4m for the Commonwealth to pick up. So the final adjustment in respect of the payout for people uninsured at the time was a minimal amount compared to the damage that was suffered.

The fact that these companies that are insuring at the moment went through a period such as the cyclone Tracy catastrophe and, despite the inflationary costs that they have had to incur, have reached the position they are in today speaks a fair amount for the effectiveness of the 1973 Act. As has been said, the Insurance Act 1973 is not an Act that is of monetary concern to the insurers; it provides for an oversight to be exercised by the Commonwealth through the lodgment of forms and the inspection of accounts which gives security to the insurer and also the depositors.

I should like to address myself again to the period that the industry has just gone through. One wonders how far the insurance industry can go in meeting costs and absorbing losses, such as the ones that it incurred at Darwin, from the proceeds of simple premiums. Anyone who had had to pay an insurance premium over the last 6 or 12 months would realise that there has been a tremendous escalation in premiums due to inflated costs and the fact that the industry has also had to pick up the tabs that have existed through the Commonwealth. Certainly, the cost does not stop there.

I believe that one of the aftermaths of cyclone Tracy was not only the increased premiums but also the fact that throughout Australia new standards have been set for building construction, both of a private and commercial nature. Some of the by-laws set by building authorities and local governments have been set unnecessarily high. These organisations have been framing their by-laws in an attempt to prevent or prepare for a situation such as a cyclone, the flood damage that occurred in Brisbane or any other unusual events. So we see that insurers, under the influence of local governments and other authorities which set standards are putting a price tab on the construction of both residential and commercial buildings that has risen over and above the inflated building costs. I have estimated that in some cases this could be as high as 15 per cent or 20 per cent just because of the additional building requirements which have been imposed as a precaution against the situations that I have outlined. This is not reflected in an insurance premium; it is reflected in the inability of some young people, and some not so young people, to get a home because they cannot afford these additional costs. I question whether these regulations are at all times necessary. I wonder whether we are trying to protect the reputation of some professional people or whether we are trying to prevent an unnecessary payout by the insurance companies. Whatever the case, the effect will still be felt by those people who cannot buy a house at this stage.

One final matter that I would like to draw to the attention of the House is that catastrophes such as those I have mentioned have had the effect of insurance companies throughout Australia drawing, not the Brisbane line, but what they call the Sarina line. This means that anybody who lives in north Queensland or northern Australia above the Sarina line pays a penalty in terms of premiums over and above those paid by anybody else. This is the position irrespective of the fact that the greater catastrophes, apart from cyclone Tracy, have occurred below the Sarina line and not above it. Therefore in speaking to and supporting the Bill I should like to draw the attention of the House to these additional facts.

Question resolved in the affirmative.

Bill read a second time.

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