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Legislative Assembly for the ACT: 2002 Week 4 Hansard (9 April) . . Page.. 848 ..

MR QUINLAN (continuing):

statistical information was simply unavailable. That was, and remains, a Commonwealth responsibility.

The events of 11 September last year added to the distress already emerging in the Australian market after the HIH effect. In particular, 11 September managed to remove 20 to 30 per cent of the available capital in the world's reinsurance market, with disastrous effects on capacity. The tightening of the availability of capital has now translated into higher premiums. It has also forced insurers to be more selective regarding the risks they underwrite.

Though the insurance market is notorious for going through cycles, this one is unusually amplified, and it may take two to three years before markets return to some normality. Whatever happens, premiums available to consumers are unlikely to return to the pre-HIH-collapse levels. However, many of these market impacts will correct in time.

As profitability improves, new capital will flow back into the market, competition will increase and premiums will fall. We should be careful not to implement changes which will inhibit this market correction. In particular, we should not encourage market interventions that create safe harbours for existing companies and which discourage new entrants.

As well as market effects, Australia will see a rise in the costs of claims. The majority of public liability claims are for property damage. However, in cost terms, claims for bodily injury outweigh those for property by a margin of two to one.

There is a lack of reliable data on the insurance industry. It is a Commonwealth responsibility-as it governs APRA, the Australian Prudential Regulatory Authority, the industry regulator-to work with the industry to improve data availability. The limited data available suggests that the cost of claims for public liability has increased at an average annual rate of 12 per cent, substantially in excess of inflation. Underpinning this is a more than trebling of the average claim for bodily injury over the past six years.

Mr Speaker, as you would be aware, I recently attended a ministerial meeting on public liability insurance to discuss the causes of, and possible solutions to, the present crisis. Many of the issues discussed at the meeting are relevant to other classes of insurance as well, particularly professional and medical indemnity. Potential solutions were raised at that meeting, some of which would help to address the market-related issues, while others are designed to reduce the costs of claims.

I am philosophically opposed to watering down individual rights to fair compensation for injury and loss caused by the negligence of another party. However, the community needs to understand that, in tackling the insurance problem, a balance may have to be achieved between individual rights and holding costs to a reasonable level to ensure preservation of our way of life and fairness to all parties. While we may not wish to consider such a compromise, the ACT is simply too small a market to stand alone.

Ever since it became obvious that our economy and social fabric were threatened by an insurance crisis, the government has taken a measured approach to assessing the problem. Many of the issues are complex and require collective action from governments and industry in the immediate and long term. It would be ill advised for the ACT to

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