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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
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
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
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
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
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Federal government review (posted 08/08/02)
The insurance industry is likely to win spectacular
financial windfalls from the federal governments 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
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.
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 persons 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 spouses 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
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
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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
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 peoples 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.
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
The problem could get worse with one quarter of Australias top
200 public companies being reported as not meeting audit guidelines.
The current push to diminish the justice systems 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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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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