The Australian Competition and Consumer Commission today welcomed the Federal Government’s issuing of the ACCC's Public liability and professional indemnity insurance monitoring report – July 2003.
The report follows a Federal Government request that the ACCC monitor costs and premiums in public liability and professional indemnity insurance to assess the impact on premiums of measures taken by governments to reduce and contain legal and claims costs.
The report is the first in a series of four reports to be produced during the next two years.
"The report shows an improvement in the profitability of both public liability and professional indemnity insurance", ACCC Chairman, Mr Graeme Samuel, said today. "Importantly, in a turnaround from recent years, insurers are expected to make an underwriting profit in these classes for the year ending 31 December 2002".
Underwriting profit (where premium income exceeds claims costs and other direct costs attributable to a class of insurance) is just one part of the overall profit picture for a particular class of insurance. This underwriting profit has been secured, in large part, by recent premium increases.
The report found that:
- public liability insurance premiums rose by an average of 19% in 2001 and 44% in 2002
- professional indemnity premiums rose by an average of 31% in 2001 and 36% in 2002.
"As the first in a series, this report is an important historical stocktake", Mr Samuel said. "Few of the reforms announced by governments had taken effect in the period covered by the report, so the actual impact of those reforms on premiums was not yet apparent. However, insurers were asked what they expected the impact of reforms on 2003 premiums would be.
"In the absence of the reforms, insurers expected that premiums for both classes of insurance would have risen between 11% and 20% in 2003. However, with reforms, some insurers expected that in 2003:
- in the case of public liability insurance, claims costs would be reduced by around five per cent and premiums constrained by about three per cent
- in the case of professional indemnity insurance, claims costs would remain the same and there would be no constraint on premiums. This is because claims under professional indemnity policies tend to reflect economic loss rather than personal injury. Most of the law reform to date has focussed on personal injury rather than economic loss.
Other insurers considered it too early to try and quantify the impact of government reforms on premiums.