Page 4172 - Week 14 - Wednesday, 23 October 1991
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A lot of misconception has been bandied about with regard to this sum of money - $40m is the figure most often referred to. There is a real danger that this will be seen as the ACT's salvation for its economic problems and that, for every project or every good idea that we would like to embark upon if we had the money, instead of saying, as we used to, that the Commonwealth should pay for it, we will now say that the NRMA should pay for it. This money is not the Government's to deal with as though it were consolidated revenue. It is money that has been collected over the last eight years or so from ACT motorists.
That has occurred because in the early 1980s, when third-party insurance in the ACT was operated by a number of companies, there was a disturbing trend in third-party insurance in this Territory. The trend was that claim frequencies were rapidly increasing and the level of claim was rapidly increasing, and a number of companies took the commercial decision to get out of the market. They took that decision because their projections were such that they thought that the market would be unprofitable and that third-party insurance would not be a good business to be in.
It must be stressed that third-party insurance, like any other form of insurance, is a business; there is almost a sense of gambling in it. An insurance underwriter takes on a risk and calculates a premium. If they get it right, they will make a modest profit; if they get it wrong, they will make a loss. Sometimes, if they are lucky and get it wrong, they will make a larger profit, and that is essentially what has happened here. But the profit that accrues is, quite clearly, lawfully, the profit of the insurer.
When the NRMA was left as the sole insurer in the ACT in the early 1980s, its projections were probably similar to those of other companies that had made the commercial decision to get out, and they were that we were in a time of difficulty for third-party insurance, with rising claim numbers and rising dollar figures per individual claim. Due to a number of factors, those projections were not to be realised. The factors were gone through briefly by Dr Kinloch. They principally involved the improvement in road safety throughout this Territory, as throughout the rest of Australia, as a result of, among other things, random breath testing; and also a concerted effort by the NRMA, as the sole insurer in the Territory, to crack down on fraudulent claims which involved both fake accidents and bloating the claims on individual accidents.
As a result, whereas the projections in the early 1980s were for increased numbers of claims and an increased dollar pay-out per claim, in fact, the number of claims has somewhat declined - the claims frequency has shown an actual drop from an index of 100 in 1983 to about 60 now, so that is a quite substantial drop, a drop of over one-third - and the size of individual claims, after a peak in 1984, has pretty well returned to where it was in 1983.
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