The Australian Competition and Consumer Commission has renewed authorisations* of a public liability insurance joint venture arrangement for a transition period, ACCC Chairman, Mr Graeme Samuel, said today.
"The arrangement provides for the collective supply of public liability insurance to eligible 'not for profit organisations' through a co-insurance pool", he said.
The members of the co-insurance pool, trading as Community Care Underwriting Agency are Allianz Australia Insurance Limited, QBE Insurance (Australia) Limited and NRMA Insurance Limited.
"The co-insurance pool arrangements were originally authorised in March 2004. At that time, it was generally accepted that the public liability insurance market was undergoing a crisis.
"Since then market conditions have changed. There are now many more insurers offering public liability insurance to NFPOs and premiums are more affordable.
"The ACCC considers that this 'softening' of the market means that NFPOs that have current policies with CCUA will be able to source public liability insurance without these arrangements in place, either from one of the CCUA members individually, or another insurance provider.
"In addition the ACCC considers the softening conditions have reduced both the public detriment and public benefits associated with the arrangements.
"The ACCC continues to have some concern over the flow-on effects the joint venture may have on the provision of insurance products by individual insurers. However, the ACCC considered the detriment would be limited due to the increased level of competition in the market, improved conditions for market entry and the increased countervailing power of brokers. Also members of the co-insurance pool are not prevented from competing against each other for NFPO business as they had been under past arrangements – a significant improvement.
"Additional concerns were identified in relation to the agreement between CCUA members not to pay broker fees, effectively reducing the role of brokers in the market.
"The ACCC believes that the arrangements might result in a limited public benefit, to the extent that it improves the availability and affordability of public liability insurance for certain NFPOs. However the ACCC did not receive specific evidence form CCUA to satisfy it that the arrangements significantly impacted on the availability or affordability of such insurance for NFPOs, despite various requests for this information by the ACCC.
"Ultimately, the ACCC was not satisfied that the public benefits demonstrated by CCUA were likely to outweigh the detriments. While not proposing to grant ongoing authorisation, the ACCC believes there is, however, a net public benefit in authorising the co-insurance pool for a short period, to allow NFPOs with current CCUA policies to find alternative arrangements".
Authorisation is granted for CCUA to give effect to any policies until the end of 2007.
"In undertaking its assessment, the ACCC did note that it may be possible for CCUA to amend its arrangements to remove key trade practices concerns. In particular, the Trade Practices Act does not prevent pricing arrangements within genuine joint ventures where these would not substantially lessen competition. Provided that CCUA is confident that its arrangements do not have a substantial anti-competitive effect, it may be free to continue to offer policies, provided it removes more specific concerns such as the agreement not to pay broker commissions. Therefore, in this regard, the future of CCUA policies is very much in its hands", Mr Samuel said.
More information regarding CCUA's application and a copy of the ACCC's determination are available from the ACCC website.