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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.

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.

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.