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Carr's insurance reforms cut justice for the injured, not premiums.



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Senator John Cherry Community Services spokesperson Australian Democrats

May 28, 2002 MEDIA RELEASE 02/268

Carr’s insurance reforms cut justice for the injured, not premiums The Carr Government’s insurance reform bill, introduced today, will not reduce premiums, but is more likely to increase insurance industry profits and cut compensation according to the Australian Democrats.

Democrats Community Services spokesperson Senator John Cherry said experience in the US showed that premiums did not fall after tort law reform, but insurance industry profits soared.

“In Texas, following then Governor George Bush’s law reform package of 1995, research showed that the reforms generated windfall profits for insurers of $3 billion in the following three years. Premiums were no different in states that engaged in tort reform to those that did not,” said Senator Cherry.

“A recent report by the Australian Consumer and Competition Commission shows that the last batch of tort law reform, led by NSW on compulsory third party, also has produced a huge profit windfall for insurers.

“Insurers now enjoy a return on capital on CTP of 30%, higher than all but a handful of other insurance products.

“Bob Carr’s defence, that it is up to the ACCC to ensure savings are passed on, misses the fundamental points that the ACCC does not control prices and that pricing and risk assessment decisions of insurance companies are clouded in secrecy and obfuscation.

“Today marks a huge victory for the insurance industry, and a huge loss for the tens of thousands of Australians injured as a result of other people’s negligence each year.

“There are some sensible reforms to the legal system that could have helped reduce pressure on premiums without cutting people’s rights. NSW Chief Justice James Spigelman outlined some of these in a major speech last month.

“But Bob Carr’s reforms go way beyond what is sensible, justified and fair. It is all about election year politics and being seen to be doing something rather than about governing and justice,” Senator Cherry concluded.

For further information: Pam Hose 0408 752 750 or 07 3252 9129

PUBLIC LIABILITY INSURANCE - THE FACTS

Year No.

Claims lodged

No. Claims Outstanding Claims Paid ($m)

Total Claims expense($m) Premium Income

($m)

Estimated Profit ($m)

2000/01 69000 47000 $525m $994m $761m -$8m

1999/00 65000 59000 $664m $1187m $812m -$86m

1998/99 52000 47000 $682m $1160m $818m -$215m

1997/98 53000 47000 $509m $778m $720m $6m

1996/97 51000 46000 $431m $665m $768m $148m

Source: Australian Prudential Regulation Authority General Insurance Statistics