ACCC findings on public liability and professional indemnity insurance issued

The Australian Competition and Consumer Commission's fourth report monitoring public liability and professional indemnity insurance costs and premiums was issued by the Australian government today.

The Public liability and professional indemnity insurance—fourth monitoring report—January 2005 stems from a request from the Australian government in July 2002 to monitor costs and premiums in these classes of insurance and, to the extent possible, assess the impact on premiums made by reforms implemented by Australian, state and territory governments.

The report shows that in the first half of 2004, the average premium for public liability insurance fell by 15 per cent, the average claims cost decreased by 11 per cent, and insurers' financial performance from underwriting public liability insurance declined. Most insurers expected premiums to remain stable or fall further in 2005, with reforms expected to have an impact on public liability insurance costs and premiums in the mid to long term.

"This is the first sign of a downward movement in premiums", ACCC Chairman, Mr Graeme Samuel, said. "These outcomes are counter to the trends observed in recent years, and could have been caused by a range of factors, including tort law reforms".

The ACCC also analysed data on the number of personal injury writs served in Victoria and the number of civil claims lodged in New South Wales. This data suggests that claimants in both states rushed to file claims with the courts before reforms were introduced.

"As a result of looking at data that predates the reforms, as well as the reform period, the ACCC observed a noticeable spike in the number of claims in both Victoria and New South Wales in the lead up to reforms being implemented. This suggests that claims that would ordinarily have been filed in 2003 and 2004 were brought forward to 2002", he said. "As a result, the net effect of reforms on the number of claims filed will only become evident over the next few years".

In respect of professional indemnity insurance, the report found that the average premium had fallen by 17 per cent in the six months to 30 June 2004, even though the average claims cost increased by 21 per cent. Given this result, the underwriting financial performance for insurers declined in the first six months of 2004, again reversing the previous trend.

The report found that although insurers did not expect reforms enacted up to 30 June 2004 to have an impact on professional indemnity insurance costs and premiums, several jurisdictions have since enacted legislation directed at curtailing the cost of professional indemnity insurance. This includes professional standards and proportionate liability legislation, which insurers expect to have an impact on claims costs and premiums in the longer term.