The report is the second in a series of four reports following a request by the Australian Government in 2002 that the ACCC monitor costs and premiums in public liability and professional indemnity insurance to assess the impact on premiums of measures taken by governments to reduce and contain legal and claims costs. Most of the tort reforms passed to date have focussed on constraining future growth in personal injury claims costs.
"This report provides an early indication of how public liability and professional indemnity insurance costs and premiums have faired in the six months to 30 June 2003 following government tort reform", ACCC Chairman, Mr Graeme Samuel, said today. "The ACCC will examine movements in costs and premiums for the full 2003 year in its next monitoring report when actual data for the entire 12 months is available".
For public liability, information from insurers shows that in the first half of 2003, there was a four per cent increase in premiums and a decrease in the average size of claims by 10 per cent. This compares with increases in premiums of 44 per cent and increases in claims costs of 46 per cent in 2002.
For professional indemnity, the ACCC report indicates that premiums and the average size of claims continued to rise in 2003, by five per cent and 19 per cent respectively. This compares with increases in premiums of 29 per cent and increases in claims costs of 56 per cent in 2002.
For this report, the ACCC asked insurers to update their expectations of the impact of reforms on premiums for the entire 12 months in 2003 to reflect further progress on reforms and claims experience.
Consistent with their expectations provided in the first monitoring report, as a result of reforms, some insurers expected that in 2003:
- for public liability insurance, claims costs would be reduced by around five per cent and premiums constrained by about three per cent; and
- for professional indemnity insurance, claims costs would remain the same and there would be no constraint on premiums. This is because claims under professional indemnity policies tend to reflect economic loss rather than personal injury.
Other insurers considered it too early to try and quantify the impact of government reforms on premiums.