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Thursday, 22 May 1980
Page: 3146


Mr Jacobi asked the Treasurer, upon notice, on 21 February 1980:

(   1 ) Is it a fact that the value of the combined assets of life and general insurance companies operating in Australia is approximately $19 billion; if so, do both sectors play an important role in Australia's economic progress, stability and development.

(2)   Was the lack of adequate legislation to protect the industry, and the Government's failure to constantly update and implement protective legislation, instrumental in the failure of the VIP Insurance Company, the Dominion Insurance Company and the Palmdale-Associated General Contractors Insurance Co. Ltd.

(3)   Will he move for the establishment of a Joint Parliamentary Committee to inquire into and report on:

(a)   the viability of the life and general insurance industries in Australia;

(b)   the need for additional supervisory legislation covering general insurers, including re-insurers and mortgage-guarantee insurers, providing in particular for-

(i)   the necessity for each insurer to be authorised for each separate class of business, with attention to be given to the (A) insurer's experience in each class of business, (B) degree of risk involved, and (C) insurer's paid up capital and margin of solvency;

(ii)   the necessity for varying amounts of paid up capital between the classes of business undertaken, and

(iii)   the necessity for varying solvency margins between the classes of business undertaken.

(4)   Will he take immediate steps to introduce legislation for the amendment of the Insurance Act 1973 to (a) provide the Insurance Commissioner with the same powers and to subject him to the same procedures in respect of authorisation as granted under the Life Insurance Act 1 945 to the Life Insurance Commissioner, and (b) to insert provisions similar to those contained in the United Kingdom Insurance Act which ensure the effective surveillance of all investments by authorised companies.

(5)   Will he reconsider the implementation of provisions similar to those contained in the United Kingdom Insurance Act, relating to (a) fit and proper persons and (b) a Policy Holders' Protection Board.


Mr Howard -The answer to the honourable member's question is as follows:

(1)   The Australian assets of life and general insurance companies operating in Australia are in excess of $ 1 9 billion. These companies perform an important role within the Australian economy.

(2   ) The operation of the Insurance Act 1 973 has increased the protection afforded to policy owners. However, it would not be appropriate for me to offer comment on the reasons for the failure of the insurance companies mentioned by the honourable member. At the same time, I would draw the honourable member's attention to the various comments published in the press following the entry of the companies mentioned into liquidation.

(3)   I do not believe that an inquiry of the kind referred to by the honourable member is necessary. The existing provisions of the Life Insurance Act 1945 and the Insurance Act 1 973 establish the machinery for the financial supervision of life and general insurance companies. It is also relevant that companies conducting certain classes of general insurance business in Australia (e.g. employers' liability) and subject to additional supervisory arrangements established by State and Territory legislation. The effectiveness of the existing Commonwealth supervisory arrangements is under continuous review and a number of proposals for strengthening the supervisory machinery of the Insurance Act are currently being developed in consultation with the Insurance Commissioner and industry representatives. The proposals, which have not yet been considered by the Government, include, inter alia, possible changes to the minimum financial standards to be observed by insurers.

(4)   (a) In developing proposals for amendment of the Insurance Act as mentioned in (3) above, the various powers and procedures provided for under the Life Insurance Act will be taken into account. I should mention, however, that there are some differences as between life insurance and general insurance which give rise to a need for different supervisory processes.

(b)   I do not believe that the wide form of controls over investments contained in the United Kingdom insurance legislation should be adopted in Australia. I should add that the proposals for amendment of the Insurance Act as mentioned in (3) above include a proposal to restrict the extent to which certain kinds of investments of general insurance companies can 'count' for purposes of the solvency provisions of the Act.

(5)   As indicated in (3) above, a number of proposals for strengthening the supervisory machinery of the Insurance Act are receiving consideration. I do not have any intention at this stage to bring forward legislation along the lines of the United Kingdom provisions referred to by the honourable member. I note, however, that certain aspects of the United Kingdom provisions mentioned are being considered by the Law Reform Commission as part of its insurance contracts reference. When the results of the Commission's inquiries become available they will be closely studied.







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