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Monday, 18 August 2003
Page: 18678

Mr GRIFFIN (1:08 PM) —The rising cost of public liability insurance has been a topical issue for the past several years. The events of September 11 and the collapse of HIH focused community attention on both the cost of insurance and the problems that some community groups have had in obtaining insurance cover. Labor believes that victims of negligence, due to another party's culpability, should be adequately compensated and that public liability insurance is one of the best ways to ensure that compensation is available.

Following the insurance crisis all states and territories have introduced tort law reforms, including caps on general damages, thresholds to prevent the commencement of actions in relation to minor injuries and measures to allow the voluntary assumption of risk. While responsibility for tort law reform rests predominantly with the states and territories, Labor has stressed the importance of Commonwealth action to support the process, particularly in ensuring that the intended savings to insurance companies are reflected in lower prices for consumers.

However, the federal government has not implemented a mechanism to ensure that these savings are passed on. The ACCC had previously said that it does not have the power to ensure that savings from the law reforms are passed on to consumers. The most recent ACCC report on the insurance industry, released on 4 August 2003, showed that public liability premiums rose by 44 per cent last year.

Despite state and territory reforms, which will substantially reduce claims costs, the industry seems unwilling to pass on the savings to consumers in the form of lower premiums. The ACCC reported that insurers expect to increase premiums for public liability this year by up to 20 per cent on average. At best, according to insurers, the reforms will only moderate the increase in premiums by three per cent. Labor believes that this represents a very poor return for consumers from the tort reform process.

It cannot be denied that reform was sold to the Australian community on the basis that it would lead to lower premiums. In March this year, commenting on the reforms recommended by Justice Ipp, the Assistant Treasurer, Senator Coonan, stated:

The actuarial information is that there ought to be an immediate reduction in premiums of about 13.5 per cent but obviously as attitudes to litigation change and the legal frame-work adjusts to a different way of looking at the handling of claims these reductions in premiums should escalate up to about 30 per cent.

Despite the fact that the key Ipp reforms have been implemented it remains of concern that public liability premiums still seem to be heading up, not down as the minister forecast. The ACCC has also noted that the insurance companies did not perceive the previous triggers for insurance premium rises, such as the collapse of HIH or the September 11 terrorist attacks, to be the current driver of insurance premium rises. The report states that these events may `already have been absorbed' by the industry.

At last week's Insurance Council of Australia Conference Mr Samuel warned the insurance companies that he would seek tougher powers to cut premiums if insurers failed to pass on savings. Mr Samuel stated that the Australian Competition and Consumer Commission will also be looking closely at other costs. He stated:

The costs savings from tort and other reforms should not be frittered away by unnecessary rises in other costs.

Given the ACCC's concern about the insurance industry's willingness to pass on the savings from the tort and other reforms, the government must act to ensure the ACCC has the power to encourage the insurance in-dust-ry to comply with the spirit of the reforms. This legislation will grant the Australian Competition and Consumer Commission the power it needs to protect consumers and ensure that savings are passed on. It will allow the ACCC to take action against any in-surance companies which exploit the savings from the law reforms and do not charge premiums for public liability insurance which reflect the impact of the law reform. This legislation is necessary to realise the benefits of the law reforms undertaken by the states.

My colleague Bob McMullan introduced this same bill in September 2002, but the government allowed it to lapse. Given that the most recent ACCC report into insurance pricing shows that savings are not being returned to consumers in the form of premium reductions, it is critical that the government supports this bill. I commend the bill to the House.

Bill read a first time.

The DEPUTY SPEAKER (Hon. I.R. Causley)—In accordance with standing order 104A, the second reading will be made an order of the day for the next sitting.