Lawyers' tort reform comments "rubbish"
A Law Council of Australia (LCA) report which says industry profits are at a 10-year high has added fire to the tort reform battle, with the lawyers once again pushing for more compensation for personal injury victims.
Despite the fact that the Australian Consumer and Competition Commission (ACCC) - which has been monitoring public liability premiums for some time - and the Federal Government have praised the reforms, the LCA has used a specially commissioned report to have another swing at the insurance industry.
The report, compiled by Sydney actuary Robert Cumpston, says insurers' returns on capital were 23% in the six months to December last year. But insurers and analysts say this was mainly due to the benign claims environment and positive investment conditions, not the result of the flow-on effects of tort reform.
The report also claims the profits are high enough to allow better benefits to the injured, and calls for the Australian Prudential Regulation Authority (APRA) to publish more comprehensive information for legislators.
And the fact that analysts say that the reforms won't have a substantial effect on insurers' bottom lines for some time doesn't ring true to the LCA either. Lawyers continue to push the same line they've been using since tort reform was introduced - that insurers aren't passing on the benefits of the reforms to their clients. But if the insurers aren't receiving the flow-on effects of the reforms yet, how could they be expected to pass on the benefits?
A number of local insurers have already cut premiums by a substantial amount despite the fact that most say they aren't receiving benefits from the reforms yet - but this is another factor that the LCA hasn't acknowledged.
The figures - which contradict the ACCC's report findings that premiums for public liability had fallen by 15% - have understandably fired up the industry.
Insurance Council Australia (ICA) spokesman Rod Frail (pictured) says the report is a case of "getting carried away with a calculator".
He says the report focuses on long-tail classes of business where profits will only be known in two to four years and as such is "based on a series of broad assumptions".
He says the industry should not apologise for strong profits. "Capital markets will not support poorly performing companies, and the only way insurers can provide security to the community is with strong capital backing.
"Rather than premature extrapolations, Mr Cumpston would be better to wait for the comprehensive APRA database to develop over the next few years to show the true picture," Mr Frail said.
Flood data won't hurt policyholders, says ICA
Residents of Bowral in the Southern Highlands of NSW have voiced concerns that new floodplain data will make them uninsurable, but ICA says it's unlikely the residents' policies will change much at all.
Last week the residents complained that almost 500 homes that were previously considered safe from flooding had been added to the "flood affected" list under the draft Bowral Floodplain Risk Management Plan for the Mittagong Creek. The study is part of the NSW Government's Flood Prone Land Policy, which is an ongoing project to collect better floodplain data.
But ICA spokesman Rod Frail says insurers probably knew which policyholders were in flood prone areas through their own research, and it's unlikely these homeowners would have had riverine flood damage included in their policies in the first place. Mr Frail says the ICA is "all for any move by councils to collect more flood data information", but whether or not this information will be passed on by all councils - like it was in Bowral - remains to be seen.
While not much has been said about NSW's Flood Prone Land Policy, industry sources say there's nothing new in the policy, and the Council of Australian Governments has been urging state and territory governments to provide flood reports sooner rather than later.
More insurance options for renovators
CGU Insurance has begun offering owner-builder insurance for NSW and Victorian residents.
Legislation requires homeowners to purchase insurance if their renovations cost more than $12,000, and if they plan to sell the house within six years.
CGU Home Warranty Manager Jacob Mamutil says the IAG subsidiary decided to offer the cover because of the "enormous growth in home renovations" and a growing number of homeowners choosing to become owner-builders.
He says the builders' warranty insurance market - which has been riddled with problems since the collapse of HIH Insurance in 2001 - has benefited from CGU providing "greater choice and more competitively priced premiums".
"In the past, arranging owner-builder insurance could take up to a month, causing frustration for homeowners. We've removed the hassle by organising necessary building inspection on behalf of the customer," he said.
CGU spokesman Chris Jackson told Sunrise Exchange News CGU plans to have regular applications processed in 12 business days, which is a big difference to the month or longer some brokers say they've had to wait in the past. He says fast-track applications will "have an even quicker turnaround of about five days".
The cover will be progressively rolled out in other states and territories.
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