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Thursday, 24 February 1977
Page: 425

Mr E G Whitlam (WERRIWA, NEW SOUTH WALES) (Leader of the Opposition) - I move:

That the Bill be now read a second time.

This Bill will establish an efficient and equitable scheme to provide benefits to anyone who has been injured or incapacitated at work or from any cause. It is a scheme for which the Labor Government twice sought to legislate while in office; it is based on an exhaustive inquiry commissioned by my Government; and it springs from a long-standing and specific undertaking by the Labor Partyto the Australian people. It is not, however, from mere attachment to the Labor Government's programs that I bring in this Bill. I commend it to honourable members as an historic and overdue social reform. It deserves the support of all parties. It will mean significant savings for the majority of Australians, and for those who are the victims of tragic accident or misfortune it will bring a measure of justice and security which has never been possible under the law as it stands.

Put simply, everyone in the community will receive protection and the whole community will save money. There will in any case be a substantial reduction in the crippling costs of motor vehicle third-party and workers' compensation insurance. These costs are an ever-growing and inescapable burden on every vehicle owner and employer in Australia. They are an intolerable burden on the States. By means of this Bill that burden will be eased and its enormous inflationary effect will be curbed. In place of the cumbersome and complex system of compulsory insurance schemes administered and enforced under various state and territory laws, the Bill proposes a national rehabilitation and compensation scheme to provide benefits in the most equitable and efficient manner. By reducing administrative costs, by spreading the burden of cost evenly and fairly throughout the community, a great reduction in charges and a vastly improved system of benefits will be possible. At present any victim of a motor vehicle or industrial accident faces delay, uncertainty and hardship before his claim is met or even considered. The compensation eventually granted may be inadequate or arbitrary. Many deserving victims and their families may get nothing at all. The system is uncertain, dilatory, costly and riddled with anomalies.

Mr Groom - How much will this cost?

Mr E G Whitlam (WERRIWA, NEW SOUTH WALES) -Last year it would have saved between $325m and $375m. It would have saved $lm a day. The scheme proposed in this Bill will provide benefits that are certain, immediate, automatic, total, uniform and universal.

No one denies that reform of the existing system will present complex technical and administrative problems. Equally, no one can deny that a solution to the spiralling cost of compulsory insurance must be found, and found quickly. The problem is urgent. Other countries have tackled it successfully with schemes broadly similar to the one I propose. I do not want to rehearse here the record of obstruction and delay, from inside and outside the Parliament, which frustrated Labor's original proposals. It is sufficient to say that my Bill in its present form offers the best possible basis for a workable national scheme. The Parliament has already had ample opportunity to consider the broad principles behind it. My Government submitted our original Bill to the widest possible public and parliamentary scrutiny. It was based on a report of the Rt Hon. Sir Owen Woodhouse, of the New Zealand Court of Appeal and now of the Judicial Committee of the Privy Council, and the Hon. Mr Justice C. L. D. Meares, of the Supreme Court of New South Wales, the Chairman of the National Advisory Council for the Handicapped and until recently Chairman of the Law Reform Commission of New South Wales. That report was received in July 1974 and tabled in the Parliament; legislation was introduced in this House on 3 October 1974; before it was given a second reading in the Senate it was referred to the Senate's Standing Committee on Constitutional and Legal Affairs. Certain provisions of the Bill were revised and improved; further improvements and refinements are incorporated in the Bill now before us. The Woodhouse Committee proposed a new deal for every Australian whose life had been disrupted by injury or illness'. This Bill will provide that new deal.

No member on either side has denied the importance or urgency of the problem. The Minister for Social Security (Senator Guilfoyle) stated on 1 5 July last year:

It is becoming increasingly evident that State Governments are very concerned at the trends in, and inadequacies of, compulsory workers' compensation and third party insurance systems. . . . The tremendous costs of the systems and the loads their premiums place on employers and motorists are of primary concern to the States and, of course, the community generally.

On that there is unanimity throughout the community. I could quote similar statements from Premiers and other Liberal spokesmen. The need for a comprehensive scheme was pressing when the Woodhouse Committee was first appointed to inquire. It is now imperative. The Parliament will be failing in its duty if it shirks the problem any longer.

The central flaw in the existing schemes is not just their exorbitant cost to the community but their total inadequacy as a system of social justice. Their faults can all be traced to the excessive legalism surrounding any system of compulsory state insurance. What ought to be a measure of social welfare has become a commercial procedure dictated by calculations of profit and loss. What ought to be a willing social responsibility for the injured and the sick has become a legal contest between adversaries. Where society should be primarily concerned with the welfare of the accident victim and his family it is more concerned with legal concepts of evidence, negligence and fault. The accident victim cannot be sure that he will receive compensation, nor what amount to expect. If no question of fault or negligence arises a victim is often without any compensation at all. The whole process of trial before a court is costly and humiliating in itself. The payment of damages as a lump sum opens the way to glaring anomalies in the amounts received By different people. Lump-sum payments are also vulnerable to inflation and leave the victim with no guarantee of a steady, regular income during the period of incapacity, let alone for life. Moreover, the need for insurance companies to calculate their premiums against a risk of massive lump sum payments vastly increases the cost of insurance. The entire system is wasteful, inefficient and unjust.

There is no dispute about the cost of accidents to society in human and economic terms. More than 90 000 Australians were injured on the roads in 1975; there were 228 000 industrial accidents. How many victims received any or adequate compensation, let alone rehabilitation, is a matter for speculation. To receive any form of compensation the victim must first determine the appropriate system for recovery. Depending on where, when and how an injury occurs, a victim may have an action for damages at common law, or be entitled to workers' compensation, or be entitled to no-fault motor accident benefits if he is injured in Victoria or Tasmania, or come within the scope of a criminal injuries compensation scheme, or be eligible for social security payments. On the other hand the victim may find himself, or herself, outside all these schemes and left to bear the entire loss alone or with the assistance of charity. The benefits, particularly the maximum amount recoverable, do not relate to the needs of the individual but depend on the particular scheme he happens to fall under at the time of the injury. Each State and Territory has different provisions in its different schemes, and each provides for different maximum amounts of compensation. Each scheme contains its own anomalies and exceptions.

In short, the one certainty in the present schemes is that every vehicle owner and employer must pay for them. The great uncertainty is whether victims will receive any benefits. Although third party insurance is compulsory and universal, it does not provide automatic cover in all road accidents, and even people who are covered are unsure of their entitlements. There is no compensation for accident victims who suffer injuries by themselves without the involvement of another party. The fact that insurance companies indemnify motorists does not mean that liability for accidents is accepted without negligence being proved. The actual amount of liability or damages becomes the essence of the court battle. Thus all the costs, waste and dissipation of resources which accompany court trials are preserved in the system.

Third party claims are never settled quickly even if there is no doubt as to liability. The injured party must face and meet his loss without recompense in the short term. He must pay all expenses and, if unable to work, suffer the resulting wage loss while his claim is processed. This often results in severe economic hardship. The delay in receiving recompense is longer in proportion to the seriousness of the injury. Thus severely injured victims, whose need for economic security is greater because of the long term nature of their incapacity, are obliged to wait until medical opinion is final before their claim is settled. This process takes a rninimum of 3 years for one-third of permanently disabled claimants. In New South Wales, after 5 years, 1 3 per cent of those permanently disabled are still unpaid. Somehow the injured party is expected to survive this greater economic burden without any form of income. The situation is inhuman.

Third party accident insurance simply ensures that funds are available to pay for injuries caused on the roads. It is not an accident compensation scheme; it merely underwrites motorists liable to be sued. This is not a satisfactory system for the victim and it is cripplingly expensive to the community. The public is overburdened in enforced payments of road accident insurance. Every State parliament levies a tax on every automobile owner. In every State the premiums are usually increased at least once a year. The spiral is unending. As inflation pushes compensation payments higher and higher, insurance premiums are forced to rise so that reserves will be sufficient to meet demands. Already there is grave doubt as to the sufficiency of private insurers' reserves. In sheer economic terms, leaving aside the compelling social and human arguments for a national rehabilitation and compensation scheme, the present costly system must be re-organised and rationalised for the benefit of the whole community.

If we remember that roughly two-thirds of the Australian population are eligible to drive motor vehicles, and more than half those people own private motor vehicles, we can see the extent of the third-party burden on ordinary Australians. A comparison of the 1974 and 1976 compulsory third party insurance premium rates illustrates the dramatic rise in costs to the motorist. In New South Wales in 1974 the premium charged on third party insurance for an ordinary motor car was $40, in March 1 976 it was $83, now it is $93. In Victoria in 1974 it was $65, in March 1976 it had jumped to $91.50, it is now $111. In Queensland in 1974 third party insurance cost $26.50 per motor car, in 1976 it was $40 (although only $12 to farmers and graziers). In South Australia the premium was $45 in 1974; it has just gone up to $89 for private cars. In Western Australia it was $27.60 in 1974; in 1976 it was $42. In Tasmania the premium in 1974 was a mere $12 per car; in 1976 it had risen to $56. All motor vehicle insurance premiums in Australia have doubled or quadrupled in the last 3 years- in the 3 years since this proposal was tabled in the parliament. Under this Bill, every vehicle owner in Australia would pay less than he is compelled to pay at present. Underwriting losses totalled $1 19m in 1974-75. This loss was incurred when claims for the period totalled $181m. The total amount of claims estimated for 1975-76 is $3 10m, an increase of 71 per cent. Premiums collected have increased by over $100m or 36 per cent. The total loss on this insurance may therefore be as high as $200m a year.

Employers' liability insurance schemes are also compulsory in every State and Territory. As with third party insurance, when liability is disputed there is a court battle with all the attendant costs, delays and uncertainty. There are 10 workers' compensation schemes in Australia The maximum weekly compensation payments on total incapacity of an employee without dependants ranges from $56.30 in Queensland to $73 in Victoria; in Western Australia the amount payable is equal to the employee's weekly earnings and in South Australia and Tasmania it is his average weekly earnings over the previous 12 months. An employer's maximum total liability for dependants on the death of an employee ranges from $27,616 in Western Australia to $19,750 in Queensland. Why should a widow in Queensland be left $8,000 worse off than a widow in Western Australia?

Amounts payable for partial incapacity arising from work-related injuries are extraordinarily varied. Let me illustrate: For total loss of sight or loss of both eyes the maximum amount of compensation payable to an employee in New South Wales is $13,500; in Western Australia it is $37,253. In Queensland maximum compensation for total deafness is $8,400; in Western Australia it is $27,939; in Tasmania it is $ 10,2 1 5; and in the Australian Capital Territory $15,387. For the loss of a foot, compensation is payable to Western Australians of $27,939, while a foot is valued at only $7,290 in Queensland and $8,000 in New South Wales. Under this Bill every employer in Australia would pay less than he is compelled to pay at present. The present schemes, however, do not cover anything like the entire work force. The largest groups not covered are employers themselves and the selfemployed. No work-related injury benefits flow to the small businessman when he suffers in the course of his work. Nor does workers ' compensation extend to independent contractors, those employed on an irregular basis, or volunteer workers for charities and religious institutions. The Old Testament formula of an eye for an eye is plainly more equitable that the present jackpot system of compensation in Australia

I have said enough to point up the anomalies and high costs to individuals in the present schemes. I turn now to the savings which Labor's proposals would achieve. The Minister for Social Security (Senator Guilfoyle) has just supplied me with official figures which show vividly the waste and extravagance built in to the existing system. I believe they will be incorporated in today's Hansard in answers to questions on notice. In 1974-75, $575m was collected in workers' compensation premiums and $2 73m was disbursed in benefits, and $306m was collected in third party premiums and $191m was disbursed in benefits. I ask the House to consider the staggering proportion of the total cost of the present schemes accounted for by administration expenses and commissions. The Insurance Commissioner's latest report demonstrates that administration expenses and commission paid for third party and workers' compensation in 1974-75 were more than $110m. In the case of workers ' compensation alone the amount of contributors ' premiums eaten up by administrative costs and commissions reached the enormous sum of $96m, compared with benefits paid of $2 73m. In other words the overhead costs of workers' compensation are one-third of the amount paid to accident victims. The actual compensation to victims would be less than the amount of $2 73m, since that figure includes their legal, hospital and medical expenses. How long must the Australian people put up with this sort of efficiency? The need for reform is inescapable. Labor's scheme would reduce this wasteful burden quickly and dramatically.

The savings under Labor's proposals were estimated by officers of a departmental working party appointed by my Government in 1974. They made a thorough, expert and impartial examination of the costs. The report was tabled in the House on 28 October 1975 and its conclusions have never been questioned or denied. The working party included officers of the

Treasury, the Social Welfare Commission and the Departments of Prime Minister and Cabinet and Repatriation and Compensation. They calculated that under Labor' s proposals vehicle owners would have paid $135m in 1975-76 for third-party insurance instead of the $240m they had to find under the existing State scheme- a saving of $105m. Employers would have paid about $340m under our scheme for workers' compensation instead of the $460m they paid under State schemes- a saving of $ 120m. Moreover, the payments amounting to between $ 100m and $ 1 50m which are at present made by way of voluntary insurance, social security, repatriation, sick leave and superannuation would be unnecessary under the scheme proposed by the Bill. The total saving to the community estimated by the working party, would, therefore, have been between $325m and $375m in 1975-76- $lm a day- and in this financial year the saving would be far greater. The estimated savings in administration costs and commissions are particularly striking: For third party insurance, $15m under present schemes, $4m under this; for workers' compensation, $105m under present schemes, $8m under this. The figures speak for themselves, and I repeat: They have never been challenged. I ask leave to incorp orate in Hansard the table from which I have b een quoting.

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