Legislative Assembly for the ACT: 2002 Week 4 Hansard (9 April) . . Page.. 847..
Commonwealth, state and territory ministerial insurance summit
MR QUINLAN (Treasurer, Minister for Economic Development, Business and Tourism, Minister for Sport, Racing and Gaming and Minister for Police, Emergency Services, and Corrections) (4.31): Mr Speaker, I ask for leave of the Assembly to make a ministerial statement concerning the Commonwealth, state and territory ministerial insurance summit.
MR QUINLAN: Mr Speaker, I rise to make a ministerial statement on the current crisis in public liability insurance confronting the ACT community. The whole community is exposed to this crisis, but those who are least able to ameliorate the problems it has created feel its effects most keenly. It is not an exaggeration to say the active, outdoor, community-based way of life we territorians have become accustomed to over the years is under threat.
All members are aware of the difficulties faced by sporting, community, business, cultural and professional groups in obtaining insurance cover for their activities. The problems generally range from a lack of available or appropriate cover to totally unaffordable increases in premiums being demanded.
Until now we have taken the availability of affordable insurance cover for granted. For the foreseeable future that assumption is under significant challenge. The purpose of this statement is to set out the government's intentions to deal with the issues that confront so many organisations and individuals.
Members will be aware of the many and varied claims about the cause of the insurance crisis. We are faced with the confluence of two significant impacts-a cyclical peak in the insurance market and rapidly rising costs of claims. These two factors have driven the current crisis.
The insurance market is currently in a hard phase, characterised by reduced competition, withdrawal of capital and the weeding out of poorly performing firms. For the last seven to eight years the Australian insurance industry has been highly competitive, with insurance firms aggressively chasing market share. As a result, underpricing of many of the liability products occurred. In recent years returns from investment of premiums have declined and have further exposed the underlying losses that these classes of insurers face.
Successive losses by insurers, culminating in the demise of HIH, have drastically reduced competition, and insurers are taking the opportunity to recover past losses. This represents an example of the hard phase to which I referred. HIH's underwriting practices, and in particular its aggressive underpricing, drove the market down to unsustainable levels. HIH secured a large slice of the public liability market, which exacerbated the negative effects on business and the community when the company eventually collapsed. The Australian prudential environment and market were incapable of detecting or halting the destructive impacts of HIH practices, because pertinent