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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

Liability issues a priority for new ICA advisory council

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Adventure tourism and carnival businesses and areas impacted by potential abuse claims are among the priorities in looking at cover affordability and availability problems, the Insurance Council of Australia’s (ICA) says, as its new Business Advisory Council begins work.

ICA CEO Andrew Hall says the advisory council, set up in response to Trowbridge report recommendations, will facilitate solutions in commercial areas facing challenges, while offering pathways if necessary for other models or government options.

“Our hope is that we can get on top of these issues before we get to these points,” Mr Hall told the ICA Annual Industry Forum. “We want to be able to ensure all options are exhausted before government gets called in to try and find some sort of government-mandated solutions.”

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson says the adventure tourism, rides and recreation area is a “number one” priority as businesses look to reopen after lockdowns but can’t obtain insurance.

“Some of this problem is because there is a list as long as our arms of statutes that require you to have a $20 million public indemnity insurance cover,” he said.

“That said, we know the market is only offering $10 million at the very best and then is excluding certain types of activities deemed by insurers out of the UK to be still too risky.”

ASBFEO is due to release a report in coming weeks on the potential for a discretionary mutual fund but Mr Billson says a strong risk focus is still required and expectations and statutory insurance requirements are also issues.

“These are not straight-forward questions, but they are pressing,” he told the forum. “I am no Harrison Ford, but a Clear and Present Danger exists within the active recreation, leisure and amusements area.”

Finity Principal and MD Estelle Pearson says specialities, where markets have typically been thin, have been hit by a pull-back by Lloyd’s and a reluctance on the part of local insurers without historical data and expertise to take on the additional risk.

Ms Pearson says there is unlikely to be appetite for the type of civil liability legislative changes made in 2002 following the failure of HIH, but there’s been a long-term diminution of the negligence test in common law and increased payments.

Areas that could be examined include whether proportionate liability is working as well as it should, the role of professional standards schemes, the National Injury Insurance Scheme and whether more class action reforms are needed.

“Looking at some of those specific areas and seeing whether we need changes to make the risks more insurable would be worthwhile,” she said.

The forum heard outcomes from the Royal Commission into Institutional Responses to Child Sexual Abuse, which included recommending the removal of limitation periods for damages claims, have created issues in providing cover in related fields.

Ms Pearson, who was an actuarial adviser to the royal commission, says the very important changes to ensure access to compensation for survivors have made some insurance products unviable.

“If you are looking at something with a 40-year tail and you are trying to assess what the environment factor is going to look like in 40 years’ time, that is obviously a very difficult pricing decision,” she said.