Committee Report On Insurance Crisis Recommends Increased Powers For ACCC

Media Statement - 22 October 2002

The Chair of the Senate Economics References Committee, Senator Jacinta Collins, today tabled in the Senate the committee's report on the public liability and professional indemnity insurance crisis.

The report recommends that the Trade Practices Act should be amended so that the ACCC can take enforcement action to ensure that insurance companies pass on to consumers any savings from current law reforms which aim to reduce insurance claim costs.

‘The Commonwealth Government has asked the ACCC to continue monitoring insurance premiums,' said Senator Collins. ‘But at present the ACCC has no power to ensure that savings are passed on. It will not be good enough if savings from current tort law reform end up in the pockets of insurance companies in the current sellers' market.

‘The Commonwealth has taken a role in response to the insurance crisis. There is a community expectation that the current initiatives will bring concrete results for insurance buyers. The Commonwealth will need to follow through to ensure that this is achieved.

‘The Committee considers that the ACCC should have powers to control price exploitation in the public liability and professional indemnity insurance market. The amendments made to the Trade Practices Act in connection with the introduction of the GST could be used as a precedent,' Senator Collins said.

The Committee's report also shows serious gaps in the consumer protection scheme set up under the Financial Services Reform Act and the insurance industry's General Insurance Code of Practice.

‘The dispute resolution provisions of the Financial Services Reform Act 2001 apply only to individuals and small businesses, and only to certain listed classes of insurance,' Senator Collins said. ‘The provisions do not apply to non-profit groups, and they do not include public liability or professional indemnity insurance.

‘As well, it is unclear whether a complaint about price exploitation in a proposed policy renewal is within scope. The insurance industry's Code of Practice has similar limitations.

‘The Committee sees no good reason for these limitations,' said Senator Collins. ‘The Committee has recommended that the relevant provisions should be amended to include non-profit bodies, and to include public liability and professional indemnity insurance.

‘The Committee regrets that at present these provisions are of no use to the non-profit groups who have been worst affected by the insurance crisis.'

Other recommendations concern the notice that insurers have to give at the time of a policy renewal. The report recommends that the legal requirements relating to notice of renewal should be strengthened.

‘The Committee is concerned by evidence of exploitative conduct by insurers, particularly in relation to last minute offers of policy renewal on exorbitant terms' Senator Collins said. ‘The Committee considers that at the least insurers should be obliged to give 14 days notice of proposed terms of renewal or proposed refusal to renew a policy.'