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Insurance surveys: claims not the cause of premium blowouts.



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Senator John Cherry Community Services Spokesperson Australian Democrats

March 25, 2002 MEDIA RELEASE 02/142 2

Insurance surveys: claims not the cause of premium blowouts Surveys of community groups and small business today showing that public liability insurance premiums have skyrocketed despite 96% of charities and 65% of small businesses making no claims show that cutting legal payouts was not the solution, according to the Australian Democrats.

A survey by charitable think tank Our Community found that 96% of non-profit groups made no claims in the past five years, while the average claim for the rest was less than $9000. 13% of groups could not afford the premium increase rise and may have to close.

Similarly, a business survey released today by the Australian Industry Group found even though 95% of small businesses had no higher claims in the last year and nearly two thirds had made no claims at all, the average premium rise was 41%.

Democrats Community Services spokesperson Senator John Cherry said these surveys confirmed other research showing that the cause of the premium rises lies in the insurance industry rather than the legal system.

“The Federal Treasurer and the NSW Premier are pushing the wrong solution to the wrong problem when they call for capping damages and restricting access to the legal system,” he said.

“This is an insurance crisis, caused by problems in the insurance industry and it is to reform of the insurance industry that the national summit on Wednesday must turn if we are to find a lasting solution.

“Litigation rates have been falling in Australia in recent years, as have public liability insurance claim payouts. The problem of rising premiums will not be fixed by attacking the wrong problem.

“The Democrats call on the ministerial summit to produce a comprehensive set of insurance industry reforms that will lead to a sustainable reduction in premiums. These include:

• setting up a new Government-backed insurance pool for non-profit groups (as the Victorian government has proposed), which has the potential to reduce premiums by 30-40%;

• establishing an ACCC inquiry into public liability insurance premium rises;

• setting up a low cost tribunal of determining small claims quickly;

• strengthening ‘waiver’ clauses for high risk activities;

• a Non-Profit Risk Management Centre to help charities reduce and manage risk;

• volunteer protection laws that provide personal immunity from civil suit for volunteers except in cases of recklessness, misconduct, or gross negligence;

• reducing State stamp duty rates collected on public liability insurance (which add 10% to the cost of premiums).

For further information: John Cherry 07 3252 9129 or 0408 066 105