Federal Assistant Treasurer Senator Helen Coonan has finally responded to the heavily publicised calls of her predecessor Joe Hockey to get a national forum under way to deal with massive liability insurance hikes and capacity shortages.

The announcement of the forum, to be held next month, will force the industry and the plaintiff lawyers to make good their claims as to the real reason for liability rates soaring. Senator Coonan’s significant delays in taking action on the three-month-old issue were caused, according to a spokesman, by “cross-portfolio issues and other housekeeping”.

While the Minister sat and sorted out the housekeeping, former Financial Services and Regulation Minister Joe Hockey filled the vacuum with demands for something to be done.

Senator Coonan told ABC Radio yesterday: “What I am really looking at is what falls to the bottom here, what can I actually encourage the states to do, because they have responsibility for public liability insurance.”

While the overall outcome of the proposed forum is not yet clear, Senator Coonan believes that at least it will assist all states to get a grasp of the situation.  “I think the substantial result we can get is that at least we can all be, hopefully, in touch with each other as far as what each state’s experience is.  At the moment it is not all that clear as to what the drivers are and what the figures mean.”

That doesn’t sound too much like the Federal Government is replete with solutions. But the option to shrug it all off as the states’ issue has the insurers worried. Victorian Finance Minister Lynne Kosky hasn’t helped with her demand that insurers open their books to prove to the Victorian Government they’re not hiding anything.

The attitude of Ms Kosky and the previously exhibited hostility of other state politicians like NSW Treasurer Michael Egan may explain why ICA Executive Director Alan Mason is so cautious about the states being able to formulate a coherent response to the issue, and why the industry is looking to the Federal Government to take a lead.

Mr Mason agreed yesterday that the liability insurance problems are state-based, but added: “The last thing we want to see is a patchwork of band-aid solutions all around the country. Certainly the common law is a matter that falls within the control of the states, so to the extent that people look at issues like thresholds, entitlement for damages and those sorts of things, clearly it’s something the state governments will have to [be involved in]. But we’re hoping there’s going to be consistency of approach.”

Mr Hockey, now Minister for Small Business, got the forum ball rolling during the media silly season. Using the insurance knowledge and contacts he gained in his previous portfolio, he was vocal in his condemnation of plaintiff lawyers’ “no win-no fee” arrangements. Mr Hockey believes lawyers should take responsibility for creating the sharp rises in liability premiums.

He’s right, sort of. As Mr Mason pointed out, there are other factors responsible for driving up premiums by as much as 1000%. These include the increased cost of capital, higher reinsurance rates and the general effects of the September 11 terrorist attacks.

Senator Coonan, who up to now kept her own counsel – just as well, because she hasn’t hired an insurance adviser yet – has clearly ruled out Mr Hockey’s suggestion of a national compensation system similar to the New Zealand Accident Compensation Corporation scheme. Mr Hockey has also retreated to the sidelines, although there’s no doubt that small business is a big stakeholder in the debate to come.

National Insurance Brokers Association (NIBA) CEO Noel Pettersen has written to Senator Coonan reserving a seat at the table, a reflection of the fact that brokers deal with 80% of the commercial insurance sold in Australia. “As the insurance industry’s major link with the commercial sector, brokers stand ready to do whatever is necessary to help find solutions,” he said.

“There’s not a lot of point in apportioning blame when Australian businesses face some major problems right now. I have written to Senator Coonan and there is no doubt that NIBA will be part of this unprecedented forum.” 

In the meantime, Mr Pettersen said he is hearing every day of how brokers are “taking the appropriate steps” to minimise the impact of the liability crisis on their clients. “While this is not a cure-all, brokers can help their clients find solutions. After all, insurance is an essential part of business,” he said.