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Friday, 15 June 1984
Page: 3098

Senator WATSON(9.17) —The Senate is debating the Life Insurance Amendment Bill 1984 and the Insurance (Agents and Brokers) Bill 1984. The agents and brokers Bill is the third such piece of legislation to come before the Senate. It is a very hollow piece of legislation compared with its two predecessors. It fills up the statute book with rhetoric but lacks all the substance to achieve the purposes for which it was originally intended. The Attorney-General, (Senator Gareth Evans) and law reformers must be very disappointed. The members of the public will never know of the sort of protection which they could have received and to which they are entitled from the operations of unscrupulous persons who, in the past, have caused millions of dollars worth of financial loss. I am referring to companies such as the notorious Bishopsgate Insurance Australia Ltd.

The Attorney-General when he was in Opposition introduced a far better Bill and the Government in 1983 introduced a far better Bill. We have to concede that there should have been some amendments to this legislation. But what did the Government do? It decided to scuttle the legislation. It resembles a burnt-out building, with the exterior shell remaining, with the new internal figuration bearing very little resemblance to its former design and the new construction not really properly fitting in an architectural sense. with its external enclosure. At best, I think we could describe it as a step in the right direction. I think the Attorney-General now with all his successive defeats must really feel very much like a Minister in opposition.

Last evening before the Senate was adjourned I was giving a background of the difficulties, problems and crises which had been faced by the industry in recent years largely as a result of the entry of foreign cut-throat operators who caused a situation in Australia in which companies suddenly became more intent on cash flow rather than profits and market share rather than financial stability. I think it was somewhat regrettable that the Trade Practices Act led to the dismantling of a free structure which was based on a century of knowledge . It was, in my view, a catastrophic move. The overseas companies that had established themselves more often than not operated out of very small offices and worked very much on a brokerage basis. Effectively, they ignored the effects upon the domestic market and they commenced a price cutting war. The weaker companies, instead of resisting, as did some of the larger companies, capitulated under this pressure and significantly reduced their prices. Ultimately even the larger companies were forced to follow suit, and brokers really came into their own in an environment which they had been instrumental in creating. To cut a long story short, the parasitic fly-by-night brokers instigated a price cutting spiral which eventually led to the collapse of such companies as Bishopsgate. Unscrupulous brokers, who bore no responsibility for their actions, effectively started an era of crises for insurance companies in Australia.

I acknowledge that this Bill is a step in the right direction, in that its aim is to implement a degree of uniformity of legislation throughout Australia. Wherever there is a multiplicity of laws, as in the case of the insurance industry, there exists an opportunity for some people-not all-to escape certain of the obligations and penalties of individual State laws. This is one area in which we need a governing Federal law. In recent years we have seen a proliferation of fly-by-night companies; in other words, insurance brokers whose sole ethical code was the furthering of their own financial situations. A broker can line his pockets with money from a client basically in two ways. He can, on receiving moneys from a client which are the premium on the insurance sought, not lodge that amount with the insurance company but, rather, invest it for periods varying between say, 30 and 90 days, or maybe more, on the short term money market effectively robbing both the client and the insurance company. He robs both in that the insurer and the insured could have likewise used that money for investment.

In addition-and this is by far the most serious offence, as well as being immoral-the broker so investing the moneys of the client knowingly and deliberately misleads him because the client believes himself to be so insured for a period when in point of fact he may not necessarily be insured at all since the company has not received the premium payable to it. I view this type of activity as being deplorable. The Bill goes some way to overcoming this type of situation, but it must be totally prevented, in spite of the problems.

The original clause 24 raised some difficulties and it needed amendment. I think that we on the Opposition side had amendments to that clause. We now have a new clause 27 which provides that the broker lodge the moneys of the insured with the insurance company within 90 days-not 30 days. Ninety days is far too long a period. The 30 day period suggested earlier would be much more practicable. But under clause 27 (2) (b), if 90 days is not enough, there is even a further escape clause, which will certainly help the unscrupulous. The clause goes on to say:

if it is not practicable for him to pay the amount within the relevant period- as soon after the expiration of that period as it is reasonably practicable for him to do so.

That is making it pretty easy for the unscrupulous. As there are time limitations, perhaps that illustration will prove my point: That this Bill is but the beginning, and there is still a long way to go to give the public proper protection.