Title COMMITTEES
Economics References Committee
Reference
Database Senate Hansard
Date 29-10-2009
Source Senate
Parl No. 42
Electorate South Australia
Interjector Milne, Sen Christine
Page 7586
Party IND
Status Final
Speaker Xenophon, Sen Nick
Stage Economics References Committee
Context Committees
System Id chamber/hansards/2009-10-29/0086


COMMITTEES - Economics References Committee - Reference


Senator XENOPHON (10:42 AM) —I indicate my support for Senator Milne’s motion. I think it is a very worthy motion and it deserves support. I would like to discuss both the merits and the issue of process as well.

In relation to the merits of having another inquiry, I would like to say a few things. Senator Hurley says that the Commonwealth does not have responsibility for home warranty insurance—and that is correct. The Commonwealth does not have responsibility for home warranty insurance at this time. But what is clear from the High Court’s decision in Work Choices is that the sphere of Commonwealth power and the extent to which the Commonwealth can be involved in issues previously thought to be the purview or the jurisdiction of the states is quite extensive by virtue of using the corporations powers, and other powers in the Constitution. I think that, if the Commonwealth wants to have responsibility in relation to this very important issue, it ought to. I believe that in terms of state schemes there has not been a seamless national approach to home warranty insurance. It has been a mishmash and a fiasco in terms of the way it has operated in various states. I note the move of the Tasmanian government to abolish the scheme, to go it alone, in a sense, with respect to this.

I think it is relevant to take into account the whole issue of what has occurred in the last 12 months since the inquiry of the Senate Standing Committee on Economics into home warranty insurance. There have been developments. The 2008 federal Ombudsman’s report demonstrated that home warranty insurance is the worst performing insurance in the nation. The recent review of the Essential Services Commission in Victoria demonstrated that this scheme is fundamentally flawed. An article from insurancenews.com.au of 21 September this year states:

The Victorian Essential Services Commission has released the latest report into the controversial privatised last resort system, which once again reveals a massive disparity between the number of claims submitted and those paid by insurers.

The Victorian report reveals insurers have accepted just 273 claims from 1363 received between 2002-08, for a total outlay of $10.23 million. It’s a profitable line of business, with insurers earning around $7 million in premium each quarter.


Senator Milne —It’s outrageous.


Senator XENOPHON —Senator Milne says, ‘Outrageous,’ and she is absolutely right. That is price gouging. Not only are you being ripped off on price but also you are being ripped off on service in terms of what is being covered by this form of insurance. The article in insurancenews.com.au goes on to say:

Judging by the report, the product is clearly failing to meet consumer expectations. That’s having a negative effect on the industry via a stream of critical reports in the daily media.

Madam Acting Deputy President Hurley, it was not so long ago that we were both in the South Australian parliament when HIH collapsed. I remember that I was involved with a group of HIH victims dealing with their frustration with the system. The then Liberal government eventually moved to provide support for those families, but it was a very difficult time for them. The delay caused a lot of angst and a lot of heartache for those people while they were waiting to see whether they were covered.

I think it indicates that we need a national, seamless scheme with consistency of purpose and consistency of service—a scheme that actually does what it is meant to do in terms of home warranty insurance. I believe there is a lot of merit in Senator Milne’s motion on the whole issue of the process. I note, Madam Acting Deputy President, in your role as Chair of the Standing Committee on Economics, you quite rightly pointed out that a comprehensive report was prepared last year and I commend the committee on the work done. I was not that involved in it—I think it was in my first few months as a member of the committee—but things have changed since that time. There have been a number of developments that indicate a need for a further review of this matter and I believe, as does Senator Milne, that we can deal with this in the course of the day. I know how busy both the Economics References Committee and the Economics Legislation Committee are, but I have confidence that we can build on the work done previously to review the recent developments and that we can at least push the agenda forward. There are many consumers around the country who have been affected by a building company collapsing and, by their having to go through the trauma of trying to claim through a very inadequately administered scheme, some good can come out of the Senate committee process.

I urge my colleagues in the coalition to consider supporting this motion. It might involve an extra day’s hearing to advance the debate. I think it is inevitable there will eventually be a national scheme for home warranty insurance. When you consider the figures and what the Victorian Essential Services Commission said about the extraordinary profits made—the gouging, as Senator Milne says, and I agree with her—these are way out of kilter with anything that the insurance industry is making from general insurance. This shows there is something wrong. I am not against people making a decent profit from their businesses, but this goes beyond that. It is a case of price gouging; it is a case of very poor service. I urge my colleagues to support Senator Milne’s motion. I also urge Senator Milne, in the event that it is defeated today, to keep pushing this issue because I think reform is needed. I also believe the Economics References Committee can play a useful role in advancing an informed debate in relation to the reforms that are needed for this industry.