Steven Ciobo (Moncrieff, Liberal Party) Share this | Hansard source

I am pleased to rise to speak to the General Insurance Supervisory Levy Imposition Amendment Bill 2006. The government recognises the importance of ensuring that consumers are able to access affordable insurance. Insurance provides the important function of allocating and pricing risk. If insurance is unavailable or unaffordable, many economic and social activities simply do not take place. This is particularly true in the case of professional indemnity and public liability insurance. Many will remember the crisis in public liability and professional indemnity insurance that occurred in 2002. This was due in part to the rapid increase in payouts through the courts for negligence during the 1990s and into the early part of this decade. This pressure was compounded by the collapse of HIH and the attacks on the World Trade Centre in 2001. This was followed in 2002 by the concerns that we had with medical indemnity.

Many professionals in my electorate of Moncrieff on the Gold Coast, as well as in other centres around Australia, were at risk of not being able to practise. In addition to that, community groups were unable to hold important social, cultural or sporting events. I spoke with many different community groups in my electorate about these matters, regularly taking the opportunity to highlight to them the moves the government was taking and the reforms it was making to ensure that, when it came to public liability in particular, they would be catered for and that they would be able to continue to undertake their community activities, which form such an important and necessary part of the social fabric not only of the Gold Coast city but more broadly.

I am pleased to say that the government’s actions in the area of tort law reform, specifically through changes to the Trade Practices Act and the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004, have certainly delivered results, especially for community groups. To ensure that the benefits of these reforms are passed on to the community, the government asked the Australian Competition and Consumer Commission and the Australian Prudential Regulatory Authority to examine and report on the market for public liability and professional indemnity insurance. As a result of this work, insurers and members of the community can now access information about the markets for these types of insurance. The good news is that both public liability and professional indemnity insurance is more available and affordable now in Australia.

The fifth ACCC report, released in August last year, shows that premiums for both public liability and professional indemnity insurance fell by four per cent in 2004. Similar results emerged from APRA’s first report from the national claims and policies database, also released in August last year. This is certainly very welcome news for the community. It means that community events such as fetes and festivals, which were at risk, are now certainly under less financial pressure and indeed are continuing in our community today.

One way the government can continue to work to ensure that insurance remains affordable in these areas is to ensure that the insurance industry remain able to access reliable data to help them better understand the nature and extent of risks in the area of public liability and professional indemnity. With this in mind, the national claims and policies database was commissioned by the government, in the context of concerns in relation to the availability and affordability of public liability and professional indemnity insurance. Unlike the ACCC survey, the database has been designed to capture public liability and professional indemnity information directly from insurers. Over time, this will provide the most accurate and comprehensive picture of the availability and pricing of public liability and professional indemnity insurance in Australia. The insurance industry, through its representative body the Insurance Council of Australia, welcomed the establishment of this database in its media release of 20 April 2004. Information within the database is used to report on the market and to assist insurers, government and other stakeholders in analysing the market.

As mentioned, the government released the first report from the national claims and policies database last August. APRA continues to work with the insurance industry to refine the accuracy of the data collected and to provide more specific analysis to help with pricing. Insurers operating in Australia are regulated by APRA. In keeping with the general cost-recovery principles that this government has established and continues to ensure that we abide by, the costs incurred by APRA in managing the regulatory framework are recovered from the insurance industry now through a supervisory levy.

APRA also incurs costs associated with tasks not directly related to its supervisory responsibilities. For example, it incurs costs in operating the national claims and policies database. However, not all general insurers offer public liability and professional indemnity insurance. This bill provides for a special levy which will allow the recovery of costs from a class of general insurance company—namely, the bill will allow the recovery of costs only from insurers who are contributing to the national claims and policies database. I certainly believe that only those insurers who contribute to and thereby can benefit from the database should contribute towards its costs. Insurers who do not use the database should not expect to fund it. The industry has been aware of the levy from the outset. This makes good sense for the industry and will assist in making sure that public liability and professional indemnity insurance remains available and affordable.

I was certainly pleased to note that the shadow minister indicated Labor’s support of this bill. I am pleased to see that there was not a scare campaign with regard to this bill, because it will have a small—albeit exceptionally small—impact on premiums. But the premium impact is certainly more than outweighed by the benefit that will flow to the industry broadly and generally as a consequence of the imposition and of the creation of this database. I commend the bill to the chamber.

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