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Legislative Assembly for the ACT: 2003 Week 14 Hansard (11 December) . . Page.. 5213 ..

MR STANHOPE (continuing):

thresholds because of the general lack of empirical evidence to suggest that the approach suggested by Ipp J and his inquiry would have the desired effect on premiums. However, all Australian jurisdictions other than the ACT have now provided a threshold that a plaintiff must meet before being able to claim general damages, such as damages for pain and suffering.

Each jurisdiction has adopted a slightly different approach. Thresholds may be based on monetary levels or levels of impairment. A threshold based on a monetary amount might provide, for example, that general damages will not be awarded if less than $12,000 of general damages are proved. This type of provision creates a "cliff face". By this I mean that a person assessed at $11,999 gets no general damages whereas a person assessed at $2 more loss gets all their general damages.

To avoid this type of problem, monetary thresholds are often accompanied by what is called a deductible. The deductible evens out the transition from getting no damages and getting full damages. For example, using a threshold of $12,000 the law might provide that between $12,000 and some higher amount, say $20,000, a plaintiff will only receive a proportion of the general damages. Alternatively, thresholds may be based on levels of impairment. In this second case, the law might provide that general damages will not be awarded where a person has suffered less than 10 per cent permanent incapacity.

However, we should consider at this juncture the case for thresholds. Research suggests that general damages represent 39 per cent of the costs of claims up to $50,000. In turn, legal and investigation fees, combined plaintiff and defence, represent 48 per cent of the cost of such claims. Thresholds provide cost relief to insurers by removing transaction costs for minor matters and reducing the overall call on funds. It should be noted that thresholds do not stop a plaintiff claiming economic loss, loss of salary or medical costs.

The imposition of thresholds may allow an insurer to pass on profit to shareholders. The transference of financial relief from an injured person into the hands of insurance shareholders as profit is not a basis for legislation. Reluctantly the government accepts that there is a social argument supporting the imposition of thresholds for general damages. There is an argument that insurance pools reserved for medical indemnity cases are presently insufficient. Where the pool of insurance available to meet the claims of injured persons is insufficient for that purpose, thresholds do serve a purpose of reserving the pool for those who have suffered the most by denying the claims of those who have suffered less serious injuries.

During passage of the second stage of the process, to avert a threat of escalating confrontation with medical practitioners, I agreed to conduct a study with the Australian Medical Association over two years of the effect of different types of thresholds used in different states and the USA. Subsequently the government came under pressure from specialists and insurers, most notably UMP, insisting on the introduction of thresholds.

At that stage, to avoid a further escalation of the dispute, I publicly agreed to introduce a threshold on general damages. Underlying the views of specialists are two concerns. Firstly, specialists are concerned that their insurance costs might rise faster in the ACT than in other jurisdictions if the ACT takes no steps to stem the number of "minor"claims made against specialists. Secondly, specialists have expressed concerns about the distracting or nuisance effect, as they describe it, of the number of claims made against

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