While the positive effects of tort reform on public liability insurance are beginning to appear, the Insurance Council of Australia (ICA) disputes media reports that it has boosted insurers’ profits. 

ICA Executive Director Alan Mason says it’s not possible for insurers to make profits as a result of the reforms because public liability represents only about 6% of total premium income.

He says statements at the recent ministerial meeting on insurance issues are consistent with the industry view that tort reform is improving the stability and availability of public liability cover.

“The industry supports the ministers’ view that there is strong evidence of greater capacity returning to the market,” Mr Mason said.

“This means greater availability of cover, particularly for community groups, who are being serviced by the Community Care Underwriting Agency and other individual insurers.”

Mr Mason says insurers can attribute some of their recovery from losses of $1.5 billion to the reforms released by governments over the past two years.

An Australian Competition and Consumer Commission report found the average size of settled claims increased by 75% from 1997 to 2002 and Mr Mason said insurers responded to that jump by increasing premiums to redress underwriting losses.

“Further increases would have been likely had reform not occurred,” he said. “That is the reason governments reacted by introducing law reforms – to ensure the community could afford public liability cover, not to bail out insurers.

“However, it was realised this was going to be a gradual improvement as the reforms flowed through into claims costs and the legal system.”

Mr Mason says the reform process isn’t yet complete, with “vital changes” to the Commonwealth Trade Practices Act still to be passed. This will prevent plaintiffs bypassing state laws to benefit from gaps in the system.