Edition 01/2002
There
Must Be Someone We Can Blame, Surely?
Various
recent editions of our IEA Sport Monthly Update have addressed the
issue of the dramatic increases in the cost of liability insurance, or
in some cases cover just not being available.
It seems that every second newspaper we pick up contains a tale
of woe relating to the problems created by this situation.
Headlines such as “Our Lifestyle At Risk” adorn the front
pages of our daily newspapers. Quite
correctly these stories explain that if the situation is let continue
unabated the very fabric of Australian society and tradition is at
risk.
Such
is the gravity of the situation that virtually all state governments
are conducting some sort of an investigation on the matter, with
Assistant Treasurer Helen Coonan calling a meeting of state ministers
as a first step to addressing “significant business and community
concern”. Actions such
as these are certainly appropriate, and any outcomes that have a
positive effect in relieving the situation will obviously be well
received by all.
In
discussions to date various issues have been raised, all of which
would seem relevant and deserving of consideration, but all of which
are rebuffed from other sections, again often with some justification.
For example, one recommendation has been for a cap to be put on
the size of awards as applies in workers compensation legislation in
many states; opposing that proposal is the claim that such a cap
contravenes the rights of the individual.
Another suggestion has been for Australia to adopt a no-fault
accident scheme as applies in New Zealand, but the enthusiasm for that
has waned having recognised the difficulties that continue to be
experienced in New Zealand,
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let
alone the fact that such a scheme has been proposed previously, with
it being considered that constitutional and political restraints would
prevent such a system ever being introduced.
The
insurance industry claims that they have suffered extreme underwriting
losses in recent years on liability insurance, and that cannot be
disputed as their claims are substantiated by cold, hard facts.
For example, in 2000 insurers collected $883 million in
premiums and paid out $1.18 billion in claims¹,
that’s close to a $300 million loss.
In addition, insurers must provide for future trends when
setting their premiums - who would like to take a guess as to the
quantum of awards in 5 years time when judgments are being handed down
on events occurring in 2002?
With a significant contributor to the demise of HIH being the
inadequacy of financial provisioning I guess insurers couldn’t be
blamed for taking a worst-case scenario approach.
Others will claim that insurers are trying to make up for poor
management and previous cost-cutting practices and acceptance
of poor risks. Some will
claim that insurers have taken a soft approach by refusing to
fight liability cases out in court when they have a chance of winning;
insurers will say that they need to make a cost effective decision,
which often means they are better off settling out of court.
The
contingency fee structure (no win, no fee) of the legal fraternity
that came about in the mid nineties, with advertising being introduced
by legal firms, some even in prime time television, will generally cop
a barreling over its contribution to the current situation.
Plaintiff lawyers however will claim that they are being
demonised and that there has in fact been an average annual decrease
in the number of lodgements received by courts throughout Australia
since 1997-98.
Continued
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