What can be done about public liability insurance premiums

Public liability insurance premiums are causing serious difficulties for the community. Small businesses and community groups are having difficulty obtaining affordable public liability insurance.

In addition to the problems with public liability, builders are having difficulty obtaining compulsory home warranty insurance. Professionals cannot obtain professional indemnity insurance.

Mudgee Council was forced to cancel its annual Christmas carols. They couldn’t afford the $5,000 public liability insurance premium. The Hawkesbury River Bridge-to-Bridge water skiing race was cancelled for the first time in 40 years. Organisers couldn’t raise the $2 million needed for insurance. The Epilepsy Association cancelled children’s camps. There are hundreds of cases like these.

This is not a simple problem; it is not unique to New South Wales. This is a complex national issue that needs leadership at the national level.

The insurance industry argues several factors have combined to create the current crisis: Low, and possibly uneconomic, premium levels in the 1990s mean consumers have been enjoying unnaturally low prices until now. Losses in investments have led to greater overall losses in public liability insurance lines of business.

Fewer insurers now offer public liability insurance. This is particularly the case following the collapse of HIH which had a large share of the market. There has been an increase in the number of personal injury claims and in the size of compensation awarded by the courts in contested claims.

Insurers were making adjustments for these factors before the events of September 11. They now say additional steps are needed to stem losses flowing from exposure to claims from September 11.

Reinsurers also seem to be reassessing the profitability of insurance markets and moving investment away from areas with potential high exposure and low returns. There is no "quick fix" for a problem of this nature and scope.

The Commonwealth, the States and Territories, the insurance industry, and consumers must work together to develop a systematic response to the price increases and changing market conditions.

We’ve had the collapse of HIH, the issue of terrorism insurance, the crisis with public liability. On each occasion, I have called on the Prime Minister to facilitate urgent action on these insurance problems.

Regrettably, the Prime Minister wrote to me as recently as last month saying he sees no need for a summit on the impact of terrorism on insurance. In response to the problems facing small businesses and community organisations, the Commonwealth Assistant Treasurer, Senator Coonan, has announced she will convene a national meeting on public liability insurance next month. But this meeting deals only with public liability.

The Prime Minister must show leadership and convene a national summit involving heads of government and the insurance industry to examine all the problems besetting the insurance industry.