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The insurance crisis is a public liability

By Alan Mason - posted Friday, 15 March 2002


Conclusion

Public liability has been a loss-making class of business in Australia since 1993. To remain viable insurers can either withdraw from this line of business or increase premiums to reflect claims costs.

The Insurance Council of Australia has called for a national taskforce to develop workable solutions to this community issue. It is expected that such a taskforce would operate best if it involved representatives of all stakeholder groups (government, community insurance industry, business and lawyers) and covered issues including the key pressures on public liability insurance and a range of possible long term solutions.

ICA has welcomed the announcement by Federal Assistant Treasurer, Senator Coonan that she will convene a meeting of State and Territory Ministers to discuss the issue.

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For the community to address this issue it needs to understand that a balance must be achieved between compensating injured people and keeping costs to a reasonable level so the system is fair to everyone.

Appendix

Statistics

APRA Statistics as at December 2000 - $ in 000

Year

Number of Claims Reported

Premium Revenue

Claim Incurred

Loss Ratio*

1998

55,000

$786,113

$1,070,862

136%

1999

72,000

$857,646

$1,234,095

144%

2000

88,000

$883,327

$1,182,746

134%

* Loss Ratio is the cost of claims as a percentage of premium collected eg ratio of 134% means for every $100 collected in premium, $134 is paid out in claims.

Insurers do receive investment income that would need to be taken into account in the final results, details of which are not shown against a class of business by APRA. However, current levels of investment returns would not be enough to restore the "balance" and the class remains significantly unprofitable.

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State and Territory GST and Stamp Duty

Effect of Stamp Duty on Liability Premiums for Year 2000

State

Rate

Premiums

GST

Stamp Duty

Total

%

$thou

$thou

$thou

$thou

NSW

10

384,423

19,221

40,364

444,009

Victoria

10

223,798

11,190

23,499

258,487

Queensland

8.5

128,757

6,438

11,492

146,686

South Australia

11

57,251

2,863

6,612

66,726

Western Australia

8

67,045

3,352

5,632

76,029

Tasmania

8

11,758

588

988

13,334

ACT

10

6,941

347

729

8,017

Northern Territory

10

3,344

167

351

3,862

$883,317

*$88,331

$89,667

Premium figures are taken from APRA Selected Statistics for the Year Ended 31 December 2000. They will differ from State of Risk figures actually collected by the States, but are a reasonable indication. * As the State figures only represent 6 months GST collection, it has been extrapolated on an annual basis.

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About the Author

Alan Mason is Executive Director of the Insurance Council of Australia.

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