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Negligence Law Review a Failure - New Enquiry Needed
Federal government ‘review’
New Queensland legislation
ACCESS TO MEDICAL RECORDS – AT LAST
THE INSURANCE CRISIS EXPLAINED
CORPORATE DISHONESTY WRECKS LIVES
Lawyer Censorship
CIVIL LIABILITY LAWS

Negligence Law Review a Failure - New Enquiry Needed (Posted 13/01/03)

In March 2001, Australia's largest insurer HIH collapsed with 5.3billion debt as a result of board room dishonesty, corporate greed and sham re-insurance contracts.

HIH's strategy of aggressive premium discounting to win customers at almost any cost and the behaviour of its competitors saw premiums cut to unsustainable levels and ran down reserves. When HIH collapsed, its competitors immediately shot up premiums - well above fair rates and sparked an insurance premium 'crisis'.

The industry was poorly prepared for the events of September 11 and the resulting pressure on insurance assests that followed world wide and this aggravated the 'crisis' in terms of premium prices.

In early 2002 and as a consequence of the 'crisis', the right of consumers to claim compensation for damages arising from personal injury and death became a topic of great debate.

In June 2002, the federal government announced a "review" of the law of negligence with the "objective of limiting liability and quantum of damages arising from personal injury and death." The panel, chaired by NSW judge David Ipp, was required to complete part of its review by 30 August and the balance by 30 September.

The 'review' was told it must assume that it was "desirable" to limit the responsibility of people who behave recklessly and limit the amounts that their insurers should pay to those maimed by careless conduct. The Ipp panel was prevented from examining the true nature of the insurance market and the factors responsible for the insurance crisis.

The Ipp report displays an alarming lack of insight into the economic and social issues concerning legal liability for reckless conduct. Despite a horrifying injury rate from avoidable conduct, the report focuses on the claims made by the victims not the careless activities that cause them.

The annual cost of avoidable injuries in Australia is estimated at over $15 billion. This was not analysed or even discussed in the report. The cause of injuries must be addressed if the continual drain on resources including hospitals and social security is to be relieved.

There is a glaring absence of detail as to the management failures of insurance companies. The extent to which poor underwriting practices and the excesses of companies like HIH and FAI has contributed to the crisis, is omitted.

APRA is a federal body that has important functions to scrutinise and investigate the management and operation of financial bodies including insurers. The Ipp report fails to address the omissions of APRA in preventing the HIH and FAI disasters.

An enquiry has also taken place into the collapse of HIH and has confirmed the accounts of sham and shadowy deals endorsed by HIH management. It has also revealed accounts of stonewalling policy holders and third parties on legitimate claims as part of a raft of dirty tricks that are considered normal in the industry. Gross faiures of regulatory and surveillance agencies has also been established.

It would be naive to assume that all other insurance players were lambs at the same time HIH was marauding as a wolf. The practices were probably not just confined to HIH.

Despite the devastating effect of the Insurance Crisis and the HIH collapse on small business and community groups, there has been no enquiry as to its cause or the role of insurance companies in bringing it about nor industry-wide dirty tricks that are designed to defeat legitimate claims. Families continue to be stressed to breaking point while insurance executives indulge themselves with multi-million dollar salaries.

If APRA failed to adequately police HIH and FAI, the presumption is that they also failed in their duty to consumers as regards to the other insurance giants and that they too deserve scrutiny.

The further industry wide enquiry should also investigate premium pricing and claims processing.

So far the only attempt to deal with escalating premiums has been to reduce the exposure of insurance companies in the hope that this will reduce insurance costs. This is also the genesis of the Civil Liability Bill (Qld) 2002.

However the happenings at HIH show that the insurance companies can't be relied on to act in any one's best interest except their own.

A full and independent enquiry is needed into those matters Ipp was specifically prevented from examining: the true cause of the crisis, poor underwriting practices as well as and premium pricing and claims handling.


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Federal government ‘review’ (posted 08/08/02)

The insurance industry is likely to win spectacular financial windfalls from the federal government’s review of negligence laws now underway by its panel of four "eminent persons". The panel has delivered two reports recommending the emasculation of consumer injury compensation laws.

The panel includes a Sydney surgeon and a NSW mayor both of whom have already spoken out in favour of removing civil rights from the public to reduce insurance costs for business.

The lack of competition in the Australian insurance market following the demise of HIH has seen predatory insurers slugging businesses, even those with no prior claims, with exorbitant premiums.

Insurers have deflected attention from themselves and encouraged other industries to direct their ‘bill rage’ at consumers who exercise legal rights. As a result doctors and local councils are publicly arguing that consumers’ rights must be restricted to halt rising insurance premiums.

A good example of predatory insurance practice is that practised on a company that runs a Brisbane shopping centre. The public liability premium demanded was up from $12,500 three years ago to $60,000 now, despite no claims ever in the past. When the owner asked to halve the cover from $10 million to $5 million there was only a negligible discount. And raising the deductible from $1,000 to $100,000 gave a premium reduction of only 10%! Numerous other cases of huge premium demands being made of businesses with "nil claims” histories have been reported.

Insurers are asking that they should be virtually claim proof but still want to collect huge premiums. The changes they want would leave individuals and families to suffer the consequences of reckless conduct while their profits will go through the roof.

Not all sectors have been targeted as severely. Most GPs will only pay around $15.00 per week (a few cents per patient) more, although some specialities have been seriously hit.

Nevertheless, one of the most vocal industries agitating against citizens’ rights are doctors who want to eliminate patients’ rights to sue for incompetence except for major injuries and to bar compensation to kids unless proceedings are started inside 7 years.

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New Queensland legislation (posted 04/07/02)

New liability laws greatly improve insurance company profits and insulate people who cause injury from the consequences of their recklessness but leave injury victims worse off.

The Personal Injuries Proceedings Act 2002 that applies to all injuries except where court proceeding were already commenced as at 1 July:-

  • exempts in most cases, insurers from having to pay the court, medico-legal and claim costs of the injured person
  • reduces the interest insurance companies pay when they delay payments - encouraging the practice of holding back payments as long as possible
  • eliminates in most cases, payments for services provided by family members during an injured person’s their convalescence
  • limits claims for loss of income earning capacity. High income earners must take out income protection policies – a further benefit to insurers’ revenue
  • eliminates in most cases, compensation to a spouse of an injured person for the spouse’s loss as a result of the injury
  • reduces the damages payable by an insurer for a loss the injured person will face in the future
  • protects persons who maim others by some act of outrageous conduct, against an award of ‘exemplary’ damages

The change that will hit most injury victims the hardest is that the injurer now pays none of the claim costs of the victim. This is a measure designed to discourage claims for injuries under $50,000 but a person with a that sort of disability is really in quite a bad way. Claim costs are something the insurer should pay for and making the victim pick up the bill just eats further into what the victim's family needs to live on.

The new laws also bring new procedures that cause delay. Before a lawsuit is commenced, a claim notice must be given to the wrongdoer and their insurer has 6 months to respond.

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ACCESS TO MEDICAL RECORDS – AT LAST (posted 18/12/01)

All doctors and private hospitals are subject to the Privacy Amendment Act which came into force on 21 December 2001.

For the first time, it gives patients the right to see their medical records and even to correct them if the information is wrong.

The previous law was that doctors owned the records and did not have to provide copies to patients except under court order. This meant people often had to sue their doctor just to get to see their records.

Some consumer lawyers estimate the new law will save consumers up to $2000 in investigation costs per case.

Some health organisations had vigorously denied routine patient access to records over the years. Professional bodies such as the AMA had turned down attempts to have doctors voluntarily provide copies.

The provisions are not retrospective and patients will only have access to those records created from 21 December as of right. It is expected however that doctors will generally be prepared to release all information.

The laws apply not just to doctors. All organisations except most small businesses (a business with a turnover of less than $3 million) and government will be subject to them. The laws came into force on 21 December 2001.

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THE INSURANCE CRISIS EXPLAINED (posted 15/02/02)

Everyone who has read a newspaper or watched TV in recent weeks has heard of the financial misfortunes of insurance companies and huge increases in public liability insurance premiums.

A decade of fierce competition – winning customers at almost any cost – has taken its toll resulting in operating losses and a depletion of reserves.

Why?

Apart from some exceptional circumstances, the decline is mainly to do with product pricing. For almost a decade liability insurance was priced more to attract customers than to cover risks. Although they employ actuaries and economists to set premiums, insurers abandoned good sense to undersell rivals.

Insurance premiums had to rise but now insurers attribute part of their mess to increases in litigation and want a government bail out and restrictions on injury compensation payments.

The Australian public may be asked to surrender fundamental rights to keep insurance companies profitable.

Litigation really has little or nothing to do with the current crisis which is more to do with past mismanagement and other catastrophes that through the benefit of hindsight could have been better prepared for:-

  • The collapse of HIH in early 2001 had the immediate effect of eliminating competition and driving up premiums.
  • Before September 11 public risk insurers included terrorism cover at no extra cost.
  • The attack on America has caused an increase in the cost to local insurers of re-insurance.
  • Insurers have for a number of years realised a low return on their investments because of declining interest rates and world growth.
  • Disasters such as the recent bush fire crisis, and Esso Longford have increased payouts.

There is no evidence that litigation by individuals has any impact on insurance rates and the restriction of the people’s civil rights should not be on the agenda.

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CORPORATE DISHONESTY WRECKS LIVES

In the biggest corporate fraud ever US telecommunications giant WorldCom is likely to collapse with debts of $194 billion wiping out the savings of investors around the world and the entitlements of seventeen thousand workers. It joins other notorious hot shots - Enron, Qwest, Xerox Corp, FAI, HIH and One.Tel – at the top of the heap of corporate scoundrels.

Greed and dishonesty have prospered in an environment promoted by legislators only too willing to lick the boots of big business in preference to ensuring a strong system of legal rights and responsibilities for their citizens.

The problem could get worse with one quarter of Australia’s top 200 public companies being reported as not meeting audit guidelines.

The current push to diminish the justice system’s ability to cater to the needs of the ordinary person means that more rip-offs are likely to occur and that they are more likely to go unnoticed.

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Lawyer censorship(17/11/06)

State laws to ensure insurance company profits restrict what statements lawyers are allowed to make to the public about personal injury compensation. Statements are only permitted to be made by an "allowable publication method" and must be restricted to lawyer’s name, contact details and area of speciality.

If lawyers mention anything else or printed statements include any pictures or graphics, they must censor references to "personal injury".

Lawyer web sites are subject to the same restrictions even though most people consider it goes without saying that the web must remain an open platform for discussion. Lawyers are even restricted in publishing statements that are critical of the censorship law!

Lawyers face being struck off for non-compliance. The law also adds overheads to lawyers’ businesses and is an impediment to providing access to justice.

In this sense the new law is a true “Jack Cade law” – a law designed to muzzle lawyers and mute their effectiveness in standing up for ordinary citizens.

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CIVIL LIABILITY LAWS (posted 10/11/07)

Civil Liability laws are the vehicle by which the insurance industry achieved its objective is to reduce injury compensation policy payouts by up to 80% following the 2002 “Insurance Crisis”.

In an amazingly successful campaign, insurers manipulated the factors that gave rise to the "Insurance Crisis". Blaming injury compensation claims rather than other factors (see above) insurers apply the blowtorch to small businesses and community groups by refusing insurance or offering it at three or four times the previous rate.  (The community groups sector had been a high profit sector for insurers and most customers had never recorded a claim.)

Their strategy was to create maximum hysteria among the public and to panic legislators into making laws that had been on their wish list for decades.

The Ipp committee was quickly established by the Howard government and told it must assume that it was "desirable" to limit the responsibility of people who behave recklessly and limit the amounts that their insurers should pay to those maimed by careless conduct.

Thus insurers, with allies in big business were able to convince government that it was reasonable to shift the cost of recklessly caused injury from the law breaker to the victim and the taxpayer.

The success of their campaign was breathtaking. Civil Liability laws enacted Australia-wide quickly after the delivery of the publication of the Ipp committee’s report have eliminated 70-80% of personal injury claims payments on businesses and household insurance policies.

But the transfer of the financial burden of reckless conduct from the wrongdoer and its insurer to the victim is not only unfair but is it is also economically undesirable. Laws that exempt reckless enterprises from having to recompense the people they maim for the true cost of their disability, are a subsidy to business. The result is an economic distortion and an insidious form of protectionism.

The distortion has four major consequences:

1.       It means that people who refuse to invest in injury avoidance practices face no economic penalty when an injury results;

2.       The distortion also penalizes those who do invest in safety because it increases the cost of production for the safe business relative to that of the dodgy competitor;

3.       The distortion means people who are injured through no fault of their own bear the lifelong cost of the injury;

4.       Some of the costs are transferred to the taxpayer through Medicare and public hospital treatment of victims.

Insurance premiums continue to rise and as taxpayers count the increasing cost of caring for accident victims, all four Australian insurers continue to boast record profits.

In August 2007, QBE posted an annualised profit of $1.84 billion on a wave of premium increases. Suncorp stunned with a jump in annual profit to a record $1.064 billion after-tax for the year to the end of June 2007. IAG is also swimming in cash with an after-tax profit of over $552 million compared to $759 million for the 2006 year.

The aggregate of Australian insurance profits since the introduction of Civil Liability laws has exceeded $15 billion.

The financial cost of avoidable injury every year in Australia is now more than $50 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.

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