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Insurance Crisis Factsheet
"I have heard of people being paid millions for frivolous cases with only themselves to blame."
MYTH
A man who bought a Winnebago motor home set the cruise control at 110 kph and left the drivers seat to make coffee. The Winnebago crashed. He sued Winnebago for not warning that cruise control could not drive for him and was awarded $1,750,000 plus a new Winnebago.
FACT
This case is fake - never happened! The Winnebago company confirms it's a lie: http://www.winnebagoind.com/contact/
"Is it true that doctors were forced out of medical practice because of skyrocketing malpractice claims?"
No. Negligent doctors and the mismanagement of medical insurer UMP were to blame for the increase in doctors' insurance premiums.
According to the WHO, Australia has the highest rate of medical error in the world.
Premiums should be related to each doctor's safety record so that careless doctors pay higher premiums than the majority who take proper care for patients.
Is it true that the insurance crisis was caused by consumer lawsuits?
No. The insurance crisis was caused by several factors including:
- Fierce undercutting among competitors;
- The collapse of HIH;
- The worldwide increase in re-insurance costs after 9/11;
- The mismanagement of company funds;
- Outrageous salaries paid to insurance executives.
- All of these forced premiums up, not personal injury claims. There is no evidence that consumer litigation has any impact on insurance rates.
What about the McDonalds coffee case?
MYTH
A woman was awarded $50 million for being scalded with McDonalds' coffee in the USA.
FACT
The grandmother had 2nd and 3rd degree burns over 6% of her body, including her thighs, buttocks, genitals and groin. She had skin grafts and a long painful recovery. McDonalds admitted that it kept coffee at 180°F-190°F to maintain optimum taste (and maximise sales) - way above the accepted safe temperature of 140°F. Their own experts testified that their coffee was a dangerous burn hazard. Over 700 previous customer burns occurred. She asked McDonalds for $20,000 and only went to court after they snubbed her. The jury ordered $160,000 compensation and $2.7 million (equivalent to McDonalds' coffee sales for one day) punitive damages as punishment for their reckless conduct. The court later reduced the punitive award to $480,000. (Note - Big Business has successfully lobbied for the outlaw of punitive damages in Australia.)
Should people assume responsibility for their own safety?
Yes. Everyone should take care for their own safety and behave with care. If someone maims another through recklessness, they should be accountable for the damage they cause. No more, no less.
Why should a person injured through no fault of their own have to bear the life-long cost of someone else's carelessness?
The real problem is safety - not lawsuits
The financial cost of avoidable injury every year in Australia is more than $50 billion. (By comparison the annual Qld budget is $22 billion). Not to mention the personal cost to consumers and their families. Eliminating lawsuits hasn't reduced the number of injuries - it has just transferred the cost to the victim and the taxpayer.
Lawsuits hit unsafe businesses in the hip pocket. They reminded us all to behave carefully and penalised the shonks who are all about profits and thought of safety as a waste of money.
Governments should have focused on injury prevention and encouraged business to invest in safety. Restricting lawsuits will increase accident rates because it has sent the wrong message to industry - that lives and limbs are not as important as profits.
Why should taxpayers have to pay?
They shouldn't. But that's the effect of drastic new laws pushed by insurance companies and big business in 2002 and 2003. Now at-fault organisations are protected from accountability and much of the cost of the damage they cause has been transferred to the taxpayer.
That's good for dodgy businesses and their insurers but a disaster for everyone else. A consumer maimed through no fault of their own has to survive on social security. Our already struggling Medicare, public hospital and welfare systems are under enormous extra pressure.
Why are there so many lies told about the justice system?
Big business resents being made to pay for shortcuts and mistakes they try to hide. The privileged begrudge citizens who come from modest backgrounds challenging - in a court - the most powerful corporations and sometimes winning.
Big business has gained a huge amount from the courts being closed to consumers and their lawyers being muzzled. Their massive investments in front groups, lobbying soft politicians and in misinformation campaigns to undermine the public confidence in the justice system has paid huge dividends.
It was all designed to get people to say: "Gosh our legal system is bad! Golly, let's fix it by making sure there are no more lawsuits against our friends, the big corporations." And it worked. New laws passed in 2002 and 2003 have permanently removed citizens' rights that took a century to achieve.
What about insurance company profits?
All four Australian insurers have boasted record profits during 2003 and 2004.
In 2004, QBE posted an annualised profit of $626 million after a wave of gouging exorbitant premium increases from customers. Suncorp stunned with a 112% surge in its insurance result to a record of $233 million, part of the company's overall record of $582 million profit. IAG was also swimming in cash with a 400% profit increase to nearly $300 million and Promina Insurance announced a $292 million profit for just 6 months.
In August 2007, QBE posted an annualised profit of $1.84 billion. Suncorp recorded a jump in annual profit to a record $1.064 billion after-tax for the year to the end of June 2007. IAG posted an after-tax profit of over $552 million compared to $759 million for the 2006 fiscal year.
The aggregate of Australian insurance profits since the introduction of Civil Liability laws has exceeded $15 billion.
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