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Wednesday, 30 November 1983
Page: 3100

Mr HOWARD(7.04) —The Opposition will support the Insurance Amendment Bill and the Life Insurance Amendment Bill. These Bills for the most part implement in principle decisions that were taken by the previous Government to improve the supervisory provisions of the Insurance and Life Insurance Acts. The Life Insurance Amendment Bill will amend the Life Insurance Act to strengthen and improve the existing supervisory machinery to overcome certain difficulties experienced by the Life Insurance Commissioner with its administration.

Specifically, the Bill will provide for a minimum paid-up capital requirement of $2m for life offices seeking registration, enable either the Treasurer or the Commissioner to impose conditions on initial or continuing registration and empower the Commissioner to exercise specified but limited controls over certain forms of investment made by life insurance companies and related companies and in trust schemes, and to require the provision of data on such investment activities. It will effect a number of administrative changes to extend the effective period for the furnishing of the Commissioner's annual report to Parliament, to give recognition in the Act to the Institute of Actuaries of Australia and to enable the Commissioner to have greater access to documents in the possession of a life office relating to its assets or business. Finally, it will allow appeals against certain administrative decisions that may be taken in accordance with the Act and upgrade the Act's appeals mechanism to bring it more into line with that contained in other Commonwealth legislation. The need for these amendments was canvassed with me by the Commissioner while I was Treasurer in the former Government and that Government had agreed in principle to the changes. The amendments contained in the Life Insurance Amendment Bill are sensible ones which the Opposition will support.

The Insurance Amendment Bill will strengthen the minimum financial standards imposed on general non-life insurance companies under the Insurance Act and will effect a number of improvements associated with the existing supervisory machinery, including the addition of further appeals provisions. The strengthening provisions of the Bill will increase the minimum paid-up capital and solvency requirements to be met by general insurance companies. These increases will be subject to appropriate phasing-in arrangements. Supervisory amendments include increasing various monetary amounts in the Act, including financial penalties, to bring them into line with present day conditions; provision for improved requirements relating to accounts; more comprehensive quarterly returns; and measures to facilitate the revocation of authorisation under the Act where a company is withdrawing from the industry.

This Bill in the main reintroduces legislation of the previous Government which was lying on the table in the House at the time of the dissolution of Parliament before the March election. The Bill also incorporates minor drafting changes recommended by the Senate Standing Committee for the Scrutiny of Bills. One omission from the Bill which the Opposition greatly regrets is the provision contained in the Fraser Government's Bill to enable the transfer of the Housing Loans Insurance Corporation to the private sector. This had been a decision of the Fraser Government and I very much regret personally and on behalf of the former Government that it was not possible for that decision to be given effect to before the change of government at the time of the last election. I believe very strongly that the Housing Loans Insurance Corporation was precisely the sort of commercial body that ought to have been sold to the private sector. Whilst the Opposition supports the other provisions that are contained in this legislation, we regret very much indeed that the Housing Loans Insurance Corporation continues quite unjustifiably to remain in public ownership.

Another major omission from the revised Bill is the somewhat controversial paragraph 15 (1) (d) which relates to insurance brokers. Provisions contained in this paragraph would have limited the extent to which premium moneys owing to insurers from insurance intermediaries could be counted as assets for solvency purposes. The basic rationale of the paragraph was to limit the extent to which an insurers compliance with the solvency provisions is dependent upon the ability of brokers to meet their commitments to insurers in respect of premium payments. An incidental effect would have been to help step up the flow of premium payments to insurers. The House will recall that as Treasurer I circulated amendments to the Insurance Amendment Bill late last year in response to objections from insurance brokers with respect to this provision: Paragraph 15 (1) (d) had the support of the Insurance Council of Australia, representing the general insurance industry, but not of the brokers.

I note that the Government will implement provisions dealing with the practice of extended credit in the insurance brokers Bill shortly to be introduced into the House and allowed to lie on the table for examination and comment by interested parties. As the Insurance Council of Australia has pointed out, the omission of the provisons dealing with extended credit arrangements from the current Bill will, of course, further delay their implementation. Until the Opposition sees the insurance brokers Bill we will naturally reserve our judgment about the adequacy of the provisions related to extended credit arrangements. The insurance agents and brokers Bill foreshadowed by the Government will, as I understand it, implement the recommendations of the Law Reform Commission on insurance agents and brokers. In 1981, in response to the Law Reform Commission's report, I indicated that the former Government considered that the need to regulate the insurance broking industry had not been sufficiently demonstrated to warrant the interference in the commercial relationships within the industry recommended by the Commission. I inform the House that currently that remains the view of the Opposition parties. We will need some persuading that the sort of intervention recommended by the Law Reform Commission ought to be given our support. In that vein, I give notice that the Opposition will be critically examining the insurance brokers legislation to ensure that unwarranted regulation is not implemented. At this stage the Opposition will naturally withhold further criticism of the proposed Bill until it is presented to the House and details are available.

I should also give notice that in the Committee stage of the debate on the Life Insurance Amendment Bill the honourable member for Mitchell (Mr Cadman) will move an amendment relating to insurance collapses which will seek to minimise risk of a repeat of the Bishopsgate Insurance Australia Ltd experience. My colleague the honourable member for Mitchell, who has taken a very close and intelligent interest in these matters over a very long period, will speak to that amendment. I hope that the Government might see its way clear to accept a very constructive and sensible amendment. I hope that in the spirit of a relatively bipartisan approach my friend the Minister for Housing and Construction and Minister Assisting the Treasurer (Mr Hurford), in his customary way, will give very careful thought to what the honourable member for Mitchell has to say. With those remarks, and subject to the exceptions that I have entered, the Opposition will support these Bills and wishes them a speedy passage through the House.