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Thursday, 17 October 1985
Page: 1412


Senator ARCHER(3.17) —I wish to speak to the Insurance Commissioner's annual report. There are two issues I wish to mention. One is that insurance fraud now joins social security and tax fraud as one of the big three. The amount of fraud that exists in insurance is very difficult to assess but the general belief at the moment is that, in fire insurance alone, it probably costs 50 per cent of the total insurance premiums of the nation just to support claims made through arson. I think the size of the insurance industry also needs to be noted. I do not think many people would fully appreciate the fact that, in the general insurance section alone, the premium income, the total of premiums paid in the year, was $7,442m. That makes it an enormous industry of considerable consequence in the overall economy.

The other matter that I think is important is the question of the general health and profitability of the industry at large. I wish to quote two sections of the report. It states:

The underwriting result of the private sector direct underwriters deteriorated from a deficit of $299 million for the year ended 31 December 1983 to a deficit of $344 million for the year ended 31 December 1984. This deterioration is due in large part to the underwriting deficit of the major Employers' liability class of business.

The other paragraph states:

The public sector results show a dramatic deterioration. The 1983 deficit of $448 million increased in the year ended 31 December 1984 to a deficit of $912 million. This is equivalent to an underwriting loss of 43 cents on each dollar of premium earned in the sector. This deterioration was caused in large part by the results of the major Compulsory Third Party class of business which deteriorated from a deficit of $420 million for the year ended 31 December 1983 to a deficit of $880 million for the year ended 31 December 1984.

The actions of the courts and the time taken to get many of these cases to the courts is a matter of great concern in getting them settled and in regard to the development of contingencies in meeting the claims. It is an extraordinarily difficult position. I do not know what is going to be done about ensuring that the amounts paid for claims of one sort or another are reasonable to all parties. I am not sure that paying people large or huge sums of money in the event of various claims being lodged is the total answer but it is the one that the courts now use. It is making insurance an area of considerable difficulty.

I believe that it is necessary, now that we have a very high level of consumer protection in insurance, for the insurers to have some protection. I hope that we can take some steps to combat insurance fraud, in particular in the areas of workers' compensation, motor vehicle insurance and arson. The penalties in these areas are not adequate and need to be brought up to date. I believe that there is adequate evidence available for an inquiry to be undertaken to get these matters brought before the public and dealt with in a more adequate manner.