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Thursday, 19 August 1993
Page: 449

(Question No. 54)


Senator Ian Macdonald asked the Minister representing the Treasurer, upon notice, on 4 May 1993:

  (1) Have the difficulties being encountered by local authorities in arranging insurance for personal indemnity and public liability been brought to the Treasurer's attention.

  (2) Has the problem been investigated; if so, what has been ascertained.

  (3) Can the allegations of cartel and monopoly practices in the insurance industry in relation to these aspects of insurance be confirmed or denied.

  (4) Given the difficulty in arranging this type of insurance, what is the reason for the difficulty and are there any solutions.


Senator McMullan —The answer to the honourable senator's question is as follows:

  (1) Yes. I understand that the difficulties encountered by some local authorities in relation to insurance for personal indemnity and public liability relate not only to availability of the product but the price at which it is available.

  (2) The price of such insurance appears to have increased as a result of the high costs of providing such cover in many cases and the withdrawal from the Australian market of a specialist insurer of this class of business. It seems that the financial difficulties encountered by this insurer which led to its withdrawal may have been the result of significant underpricing by it of the product when it first entered the market.

  (3) The Insurance and Superannuation Commission (ISC) has no knowledge of any cartel or monopoly practices in relation to this class of insurance. However, competition in this class currently is weak as a result of high losses, the withdrawal of the specialist insurer and some apparent difficulties in obtaining reinsurance at reasonable cost on the international market.

  (4) See (2) above. The ISC understands that this type of insurance is available from local underwriters and brokers at an increased price while some local authorities have entered co-operative mutual aid schemes (collective self insurance) to provide the cover required.