Mr CARR (Maroubra—Premier, Minister for the Arts, and Minister for Citizenship) [2.44 p.m.]: Mudgee Council was recently forced to cancel its annual Christmas carols because it could not afford the $5,000 public liability insurance premium. The Hawkesbury River bridge-to-bridge waterskiing race was cancelled for the first time in 40 years for the same reason. Public liability insurance premiums are causing serious difficulties for the community. Small businesses and community groups are having difficulty obtaining affordable public liability insurance. In addition to the problems with public liability, builders are having difficulty obtaining compulsory home warranty insurance, and professionals cannot obtain professional indemnity insurance.
There are many cases like those I have quoted. This is not a simple problem and it is not unique to New South Wales. It is a complex national issue. The insurance industry argues that several factors have combined to create the current crisis: low, and possibly uneconomic, premium levels in the 1990s; losses in investments; fewer insurers now offer public liability insurance following the collapse of HIH; the increase in the number of personal injury claims; and the size of compensation awarded by the courts. Insurers were making adjustments for these factors before the events of 11 September. They now say additional steps are required to stem losses flowing from exposure to claims from 11 September. That has had a big effect on reinsurers, as the House would be aware.
We have had the collapse of HIH, the issue of terrorism insurance, and the crisis with public liability. On each occasion we have pressed the Federal Government and the Prime Minister to facilitate urgent action on these issues. The Prime Minister wrote to me as recently as last month saying he sees no need for a meeting on the impact of terrorism on insurance, which I find hard to believe. In response to the problems facing small businesses and community organisations, the Commonwealth Assistant Treasurer, Senator Coonan, has announced she will convene a national meeting on public liability next month. The meeting will deal only with public liability.
The Prime Minister must show leadership and convene a national summit involving heads of government and the insurance industry to examine all the problems besetting the insurance industry. The Commonwealth regulates the industry. It does so through the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, and the Australian Competition and Consumer Commission. For example, the Australian Prudential Regulation Authority recently increased the amount of capital that insurance companies need to back their public liability risk. That must lead to higher public liability premiums. The point is, the Commonwealth has a direct role and direct influence on the insurance market.
The Commonwealth has the power to obtain information from insurers to analyse the causes of the current crisis. It is the Commonwealth's responsibility to examine the conduct of insurers towards consumers, and to do other things as well. The insurance industry also needs to review its own practices. The industry should ensure that current prices are not an overreaction to the collapse of HIH and to what happened on 11 September. The industry should give rational quotes for public liability insurance, based on the risk involved. At the very least, insurers should explain clearly to customers why their individual risk circumstances may not be relevant. In the current market a good claims history or low level of risk does not seem sufficient to ensure that insurance will be either obtainable or affordable. This is extremely frustrating for those community organisations with impeccable records and low risk.
The industry's opposition to taxes is not new and stamp duty is clearly not the cause of recent massive premium increases. However, any merit in the arguments against taxation will be considered as part of the Government's review of options to tackle public liability insurance problems within the State. No-one should persist with the argument that it is the duty of the State government to subsidise insurance premiums. I am aware some organisations may want this. I understand how disappointing it is, particularly to country communities, that events are cancelled because of the inability to obtain insurance.
I must make this important point: While insurance costs are necessarily factored into levels of public funding for certain community services, direct subsidies for other events and organisations might actually entrench inflated premiums at taxpayers' expense. In the short term, some community events and activities might be able to proceed if subsidies were given but, in the long term, the whole community might end up paying for higher premiums for years. We have take action in this State such as the provision of a $600 million rescue package following the collapse of HIH. The package covers claims against HIH—both compulsory third party [CTP] motor vehicle and home building warranty.
We also called on the Prime Minister to set up the HIH royal commission. I think it is fair to say that we shamed him into setting up that royal commission. We introduced health care liability reforms in response to an increase in litigation and skyrocketing insurance costs. The Government will also shortly introduce legislation to exclude terrorist acts from compulsory third party motor vehicle policies. That will ensure that the CTP scheme can continue, despite international reinsurers refusing to cover terrorist acts as part of their response to what happened on 11 September.
Today I am pleased to announce another sensible initiative aimed at pushing down the pressure on rising insurance costs. I mentioned earlier that one of the many factors leading to rising costs is the increase in personal injury claims and the size of compensation payouts when those claims are contested. The trend has been driven by an increasing trend towards litigation in our society. Australia is adopting a culture of blame even when the damage suffered might be minor and temporary. Elements in the legal profession have encouraged a view that someone else must always pay; that litigation is the way to resolve disputes. All it does is increase costs for insurance customers and the wider community.
So today I can announce that the Government is introducing restrictions on lawyers advertising for personal injury matters to take effect from 1 April. I have discussed this with members of the Law Society of New South Wales and they are supportive of these changes. I give them credit for that and I thank them for their sympathetic approach to the problem that this represents for the Government of New South Wales. The rules that we propose will stop lawyers advertising personal injury services on television, on radio and in hospitals. For example, patients and visitors will no longer see those offensive advertisements for lawyers in hospital lifts.
The new rules will also restrict the kinds of statements that lawyers can make about personal injury work in printed advertisements or advertisements on the Internet. The rules will prevent lawyers engaging in ambulance chasing advertising. This advertising encourages people to claim for every slip and fall, regardless of the merits of the case or their genuine need for compensation. The new rules will counteract the trend to excessive litigation which is evident in parts of our society. On the broader question of public liability insurance the Government is holding discussions with the Insurance Council of Australia, the New South Wales Council of Social Service, arts and sporting organisations, small business and tourism operators and local government representatives.
The Government is helping organisations help themselves. Next month the Minister for Sport and Recreation will launch a detailed risk management guide for sporting and recreational clubs in the State. The Government is working with local councils to identify options for managing their liabilities arising from the HIH collapse. There is a need to consider how councils might arrange their insurance and risk management in a more effective and consistent way across the State. We are holding discussions with the insurance and building industries to ensure that the Home Building Warranty Scheme is not adversely affected by these developments.
The Government is co-operating closely with Victoria, which has a similar scheme, to develop a co-ordinated response to the issue. The New South Wales Government has asked that the issue of public liability insurance be placed on the agenda for upcoming meetings of the Council of Australian Governments and the Standing Committee of Attorneys General. In December, Cabinet directed the Cabinet Office, Treasury and the Attorney General's Department to co-ordinate a review of potential reform measures such as reforms to the tort law system and the statutory requirements to hold public liability insurance.
The Government intends to put on the table for discussion at the national meeting some of the options for reform being considered by the review. The options include capping damages for some types of compensation, such as compensation for lost future earnings. Another option is to set thresholds for claims so that trivial claims do not waste valuable court time or increase costs for the community and insurers. Another reform worth considering at this national level is allowing provisional damages awards and encouraging or requiring the use of structured settlements. The success of these reforms, however, depends on the Commonwealth fulfilling its commitment to change the taxation system so that structured settlements are not subjected to disadvantage.
Aren't Opposition members pathetic! They do not have a policy to bless themselves with. They have not got a policy on anything. We were promised in February—and we are still in February—that there would be a policy blitzkrieg from the Opposition. We are searching the skies and not a document is coming across the channel. Not a document is in sight. I have the Stasi on the radar and there is no sign of a blitzkrieg anywhere. They say that the Stukas and the Messerschmitts are still in their hangars.
Time is passing and there is no sign of a policy blitzkrieg. Honourable members should remember that Opposition members threw Peter out in December. It is not too late in the year for them to change their leader. It is not too late for the manifest ambitions of the sneering, leaking team opposite to make itself clear. Our old friend the honourable member for Vaucluse has positioned himself. I have a quote from the honourable member for Vaucluse but I do not want to interrupt the train of his concentration now by drawing on it. Honourable members are insisting that I use the quote. On 13 June 2000 the honourable member for Vaucluse repeated that he could not loyally serve on the front bench under the Leader of the Opposition. If honourable members saw those quotes in the Sunday papers they would be aware that the honourable member for Vaucluse is not serving loyally on the front bench under the Leader of the Opposition. Isn't it good to be back?
The Leader of the National Party is interrupting—the man who is never there. He is never at the bushfires, never in the country and never doing the job. He does nothing, is never around and is never on duty. Other reform options include requiring parties in personal injury cases to undertake conciliation and introducing shorter limitation periods for claims.
Mr Souris: What was that about Tamworth?
Mr CARR: What a childlike performance from George! Give us a single policy on any subject.
Mr SPEAKER: Order! I ask the Premier to return to his ministerial statement.
Mr CARR: George, give us a single policy on any subject! Before this session is over I am going to read out the policy rollcall subject area by subject area, portfolio area by portfolio area along the front bench and ask shadow Ministers to produce any evidence of a policy blitzkrieg. It might be you, it might be you or it might be you. Give us a policy—a scrap of policy. Enough of these distractions!
Other reform options include requiring parties in personal injury cases to undertake conciliation and introducing limitation periods for claims. The impact of lawyers' fee arrangements on the growing litigiousness of our society will also be considered. Limiting the liability of organisers of events that have a particularly high value to the community might also be considered, as might limiting the liability of organisers of inherently dangerous activities. The Government recognises that there are advantages and disadvantages in each of these options. This is why they should be discussed in a national forum. If the Government could be certain that reforms to New South Wales laws would help reduce insurance costs we would not hesitate to introduce a range of these options now. But the issue has national implications.
The findings of the HIH royal commission will also need to be reconsidered. We need to be certain that any reforms to New South Wales legislation will address the underlying causes of the problem. We need a consistent and nationwide response. Our new rules on lawyers advertising are an important step in stemming the rise in insurance costs. The Government will bring additional serious reform proposals to the national meetings. Our rich diversity of cultural, social, business and sporting opportunities is under threat. We have to fix public liability. We have to do it nationally; we have to do it co-operatively, and we have to do it quickly. This Government wants solutions and will do anything in co-operation with other jurisdictions to get them.
Ms SEATON (Southern Highlands) [3.02 p.m.]: The Premier has at last woken up to something that we have been calling on the State Government to do something about for some months.
Mr SPEAKER: Order! The Premier will resume his seat. The honourable member for Southern Highlands has the call.
Ms SEATON: The Premier's comments today have highlighted breathtaking hypocrisy in the Australian Labor Party's approach to the insurance crisis, which is affecting community groups, businesses and sporting clubs around the State. To date the Premier has steadfastly ignored the plight of the many groups that are having to cut back on activities or reduce the scope of their business activities. They are struggling in this public liability crisis, which he has ignored. A very interesting thing happened last week.
Mr SPEAKER: Order! I call the Minister for Information Technology to order. I call the honourable member for Illawarra to order. The Premier will cease interjecting.
Ms SEATON: Last week the Treasurer called a press conference in which he tried to blame this entire issue on the Federal Government. He said that this was a national issue, that it was nothing to do with the State Government and that it was the Federal Government's problem. At the same time a very interesting set of documents was circulating in the name of the honourable member for Port Stephens, Mr John Bartlett. The honourable member was promoting a public liability insurance summit involving the Attorney General, the Hon. Bob Debus, and the Minister for Fair Trading at Westbury Marina Resort on Thursday 21 February. He had invited businesspeople in his electorate to part with $30 to hear two of the Premier's Ministers talk about public liability.
The media release of the honourable member for Port Stephens of 17 January stated that anyone who came along and spent their $30 to listen to the two Ministers would have a chance to make contributions to the Government's formulation of legislative change by the second half of this year. On the one hand the Premier is saying that this is a Federal Government problem, we should get rid of all this; on the other hand the Government is saying that it has some power to influence the situation. It cannot have it both ways. This is a State by State issue. The cost of public liability insurance and indeed a number of other insurances is influenced by a range of State legislation.
Under fair trading legislation, anyone that forms an association is required to have about $10 million worth of liability insurance. A range of clumsy pieces of State legislation is creating conflicts and additional costs to businesses and volunteer groups. These issues are heard in legal jurisdictions in this State. The Premier is not telling us how much money the Treasury is raking in every day from stamp duty on increasing public liability and other insurance premiums as a result of this crisis. Last year the Premier, the Treasurer and this Government raked in something like $40 million of stamp duty on public liability insurance premiums alone. And let us remember that they are charging a 10 per cent stamp duty on top of the GST-inclusive price of a premium. They are double dipping; they are charging a tax on a tax. In addition, the stamp duty from public indemnity insurance policies last year was of the order of $60 million in New South Wales.
The Trowbridge and Deloittes report that came out last week predicts an increase of up to a 20 per cent in the cost of such premiums to businesses. This Government stands to get another $23 million just out of those two types of insurance. The growth in premiums is a good explanation for the Premier and the Treasurer trying to put the issue onto somebody else and ignoring their responsibilities to bring the crisis under control in this State. Mr Speaker, I do not know why the Premier has suddenly woken up but perhaps it is because people in electorates held by Labor members are starting to cry poor. They cannot go ahead with all the different events and business activities they want to conduct.
The Illawarra Mercury has daily reports showing how this insurance crisis is affecting people in Labor seats. Perhaps that has made the Premier wake up at last and realise that there is a problem. But he has not yet told us whether he is going to bite the bullet and recognise that he is profiteering from the stamp duty increases on increased public liability insurance premiums that he rakes in every day. If the Premier were really serious about dealing with insurance premiums and bringing them under control there is one thing he could do. Members will be aware that legislation introduced last year will introduce changes and new regulations to the level of competencies and the way in which education and training are arranged for real estate and property agents. Many people in that industry are waiting to see the regulations that will go with the legislation.
Real estate agents and property agents in New South Wales ought to be congratulated on their efforts in raising the standards of their industries and in raising their levels of education and training. They are waiting for the State Government to produce the regulations that will complement the legislation and give it meaning. For the first time the legislation also requires real estate agents to have compulsory professional indemnity insurance. Real estate agents are concerned that, because the Government is delaying the production of those regulations and is giving no guarantees about the date of release of a consultation paper, when they seek to obtain that professional indemnity insurance for the first time the insurance industry will have no evidence on which to base premiums. Therefore, we might see a whole new professional indemnity scheme commence, with premiums at a much higher level than would have been the case had the Government released the regulations and other information and given the insurance sector reason to be confident that the real estate and property agents industries are doing their best to increase their competencies.
Another issue the Premier mentioned but dismissed was home warranty insurance. This issue is affecting builders across New South Wales who are having to turn away contracts and reduce their staffing levels. When I was briefed on this issue by senior members of the Department of Fair Trading I was disappointed to learn that there is an attitude of neglect, that the Government is clearly dismissing the plight of builders who are in this situation. I have been told by senior representatives of the department that only 2 per cent of builders are affected by this problem. As a result, the Government is not interested in this matter.
The minutes of last year's meeting of the ministerial reference group on home warranty insurance contain an action note stating that the reference group seeks advice from the Crown Solicitor about the deeds of indemnity, and now legality. Those deeds of indemnity are causing builders to put their own homes in hock before they can even make an insurance application or have an insurance premium agreed. The Minister has had the opportunity to provide advice from the Crown Solicitor to the ministerial reference group to solve this problem, but he does not care enough to even ensure that that advice is provided. That is another example of the Government's indifference to small business, and its indifference to the costs that are inevitably loaded onto home buyers who, when they move into the home they have built, have to cover the costs of the delay and the costs that builders are having to pay.
The Premier very deliberately did not mention stamp duty. The Premier needs to come clean on exactly how much stamp duty he is raking in from the increase in premiums across all sectors of insurance. Figures provided by the Insurance Council of Australia show that there has been an increase in public liability claims from approximately 53,000 to 88,000 per annum. Payouts have increased from $883 million to $1.2 billion. More than 60 per cent of settlements are uncontested, and this has contributed a great deal to the costs of the system. Something like 50 per cent of the $1.2 billion payout figure involves legal fees. It is simply not acceptable for the Premier to have spent the last two months denying any responsibility at State level for this state of affairs.
After refusing to call a State Premiers and leaders meeting to discuss this issue, and after refusing to take any initiative whatsoever on the issue, the Premier has suddenly decided to make a statement on this issue. Perhaps at last he has realised what everyone on this side of the House has known for some time: that public liability costs are absolutely crippling small business, volunteer organisations and sporting organisations. The Premier ought to have said two months ago that he was going to take to the meeting in March a comprehensive approach to public liability and solutions to the crisis. He should have put together a comprehensive program; he should have taken leadership on this issue; and he should have been signalling to business and volunteer community groups and sporting groups that he wants to see an end to this.
The Coalition welcomes efforts to stop ambulance-chasing advertisements. We look forward to examining changes to legislation that reflect the fact that terrorism is no longer covered in many instances. We look forward to seeing such legislation and considering the details of it. However, the Premier should take his own advice and stop participating in the blame game. He should get serious about finding solutions to home warranty insurance, professional indemnity and WorkCover, and he should take action to reduce the costs of insurance to business and the community.