Interview: Machine Man
Unions: Testing Times
Bad Boss: Freespirit Haunts Internet
Unions: Badge of Honour
National Focus: Noel's World
Economics: Safe Refuge
International: Global Abuse
History: The Honeypot
Review: Death And The Barbarians
Poetry: Who Wants to be a Millionaire?
The Mouse That Roars
Justice For Victims Denied
The Westie Wing
When it comes to insurance, it's a fair bet that any figures produced will be rubbery.
This is especially the case in relation to so-called insurance cost "blowouts" in workers' compensation and other areas such as public liability, home warranty and car insurance.
There was an interesting article by Bob Officer in the Australian Financial Review on Tuesday 4th of May. Bob is an emeritus professor at Melbourne University and has been on the board of the Victorian Workcover authority for nearly 10 years.
Take the issue of the assets and liabilities ratio of Workcover schemes, which allows a balance of income and expenditure to cater for workers' compensation claims. The tricky part is that the assets are current whereas most of the liabilities are theoretical projected estimates, creating statistics that are open to all sorts of interpretation.
Officer makes the point about the viability of Workcover schemes that many in the union movement have argued for years:
"Arguments for privatisation of such schemes assume that a clear contract or property right can be given to the private operators. Changing community standards of what is a reasonable level of compensation lead governments to change the statutory claims payments.
"Losses occur when changes in claims payments are inconsistent with premiums collected to compensate future claims. This ultimately leads to insolvency in competitive market schemes. I suspect this was the reason for the government taking over workers' compensation insurance in the 1980s."
This is precisely the case, but it is a point too easily forgotten by governments amongst the fog of lies, damn lies and statistics manipulated by the insurance industry.
It is time the NSW Government made a stand in the insurance market and stopped providing emergency insurance when the private market refuses.
A much more sensible and probably cheaper scheme would be to intervene to prevent the strike of capital and pricing collusion in the insurance industry by re-introducing a state-owned insurance company, like the GIO used to be.
At the moment, insurers cannot deliver adequate and affordable cover in many areas. The New South Wales Government has been picking up the pieces of the insurance market for years.
Most recently in New South Wales, the Government established Community Cover, an assistance scheme for not-for-profit organisations and charities to purchase insurance through the NSW Council of Social Services. This became necessary because the insurers have increased premiums by up to 1000% in recent years due to a lack of competition in the private market.
The State Government continues to provide insurance where the private market fails and the insurance companies are no worse off. A Government insurer would provide decent competition to the insurance companies and allow for lower premiums and better cover.
The framework of a government insurer still exists in the form of the NSW Treasury Managed Fund, which is the self-insurance scheme for State Government Agencies, covering Workers Compensation, property, public liability and motor vehicle insurance.
This fund is working well, in surplus and is expected to remain fully funded in the future. The Treasury Managed Fund may end up covering the estimated $800 million shortfall in the Medical Research and Compensation Foundation set up by James Hardie to cover Dust Diseases claims in relation to workers exposed to asbestos.
It's reminiscent of when NSW WorkCover was established in 1987, the Unsworth Government underwrote the shortfall accumulated by private insurers in the Workers Compensation scheme after significant changes to the system.
More recently, when the home warranty insurance system collapsed with HIH, the insurers fled like rats off a sinking ship and again the Government was left to pick up the pieces.
The Insurance Australia Group recently entered the home warranty insurance market and immediately the insurer with over 80% market share, Promina, cut the cost of insurance by up to 30%. There are still only a few insurers in the market and the lack of competition means premiums are exorbitant.
It has got to the point where the NSW Opposition is attempting to outmanoeuvre Labor by drafting legislation to set up a government scheme to replace the private system!
These examples of recurrent corporate welfare and Government insurance by another name clearly show that more radical solutions have to be considered, so that the best deal for the taxpayer can be found.
The lies have to be silenced and the true statistics heard.
For more information on What's On in NSW Parliament, go to www.ianwestmlc.com.au/new.html.
I am interested to hear feedback and ideas--you can contact my office on (02) 9230 2052 or email me at [email protected]
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