Insurance pay-outs for public-liability claims in Australia fell by 21 per cent last financial year, according to the most recent Australian Prudential Regulation Authority figures.
The figures come as the insurance industry is pleading higher claims and litigation costs to justify huge increases in public-liability insurance premiums.
The authority issues detailed statistics each year, but does not do year-by-year comparisons itself.
The estimated cost of future public-liability claims fell by 17 per cent, and the number of outstanding claims at the end of the financial year fell by 20 per cent.
The figures reveal that a major force for the higher premiums is huge increases in reinsurance costs – where insurance companies re-insure against having some spectacularly large claims against them.
In 2000-01, claims paid out on public-liability policies underwritten by the 100 or so general insurance companies came to $525.4 million, down from $664.2 million the previous year.
On another measure, net claims, which includes payments on indirect claims and excludes recoveries for over-payments, offsets and the like, the pay-out by insurance companies fell by 30 per cent to $582.7 million.
However, the number of public-liability claims in 2000-01 rose by 6.2 per cent to 69,000 – perhaps indicating more minor claims are being made.
The costs of reinsurance rose by 92 per cent to $295.4 million in 2000-01 – before the September 11 World Trade Center attack. Premium revenue was down 6.2 per cent.
The reduction in public-liability claims comes with a reduction in the cost of all general insurance claims (including household, car and other insurance) and an increase in profitability (or at least a reduction in losses) overall in the industry, according to the APRA figures. Claims pay-outs fell 16.6 per cent overall (or 11.9 per cent on the “net” measure) down to $11 billion. Underwriting losses fell from $1.8 billion to $811 million – the eight successive year of underwriting losses. Insurance companies tend to make their profits from investments.
The Insurance Council of Australia says the latest figures are an aberration because they do not include the collapsed HIH group, which has not reported to the authority since December 2000. The Council’s corporate affairs manager, Rod Frail, “”We are cautious of these figures.” HIH was a big public-liability insurer.
Even without HIH, the number of claims had gone up. The loss ratio in calendar years 1998, 1999 and 2000 were 136 per cent (that is $136 paid out for every $100 collected), 144 per cent and 134 per sent respectively. Mr Frail said legal advertising and no-win, no-fee cases had improved access to the law, but at a cost. And they had raised community expectations.
claims could be made up to 25 years after the event in cases of injury to children. Legal advertising had come
The council has welcomed a conference called for next month on public-liability insurance.
Canberra personal-injury lawyer Pat Worthy said lawyers were not interested in speculative cases. They were too costly for the legal firms.
“”In my experience, claims have not increased by much, if at all in the past 10 years of so,” she said. The public remembered the odd spectacular pay-out, but did not hear of many amicable settlements or insurance companies wasting money resisting legitimate claims.
The president of the Law Council of Australia, Tony Abbott, cited Productivity Commission figures that the number of court cases had fallen by about 4 per cent a year since 1997-98.
In the past month or so, examples of public-liability cost increases for community and sporting events have been the Thirlmere, in NSW, annual steam festival going from $120 to $2500; the Evandale, Tasmania, has an annual Penny Farthing Championship getting a bill for $10,000; the Lake Illawarra waterskiing championship getting a bill for $50,000; and Thorpdale, Victoria, has an annual potato festival getting a 1000 per cent insurance premium increase.