The insurance industry and the Federal Government have welcomed research showing public liability premiums are continuing to fall.

The Australian Prudential Regulation Authority (APRA) National Claims and Policies Database has found liability premiums dropped by an average of 13% during last year. That was on top of a 6% decrease in 2004.

Assistant Treasurer Peter Dutton says reduced premiums benefit all aspects of insurance. “The falls in the affordability and costs of public liability and professional indemnity insurance are great news for individuals, community groups and businesses,” he said.

“The research highlights the real benefits of the changes made to the laws of negligence around the country. While it will still take some time to see the full effect of these changes, these early signs are very encouraging.”

The Insurance Council of Australia says Government reform has ensured Australians are able to take part in community activities while providing appropriate compensation to seriously injured people.

“The latest figures from APRA show the reforms are having a positive impact on both public liability and professional indemnity and that insurers are playing their part,” CEO Kerrie Kelly said.

Premium rates have fallen substantially in the past two years but insurers are maintaining profitability. JP Morgan analyst Shane Fitzgerald says prices have continued to fall during 2006, yet there is no need for insurers to panic.

He says the reductions are off a very high base. Rates increased more than 100% between 2000 and 2004, so there is still plenty of “wriggle room”.

“Profitability is still very good,” he told Sunrise Exchange News. “It’s still a long way from being loss-making.”

That said, the extensive lag between premiums and claims makes the pricing of liability insurance a difficult task. “There’s always a risk they undershoot on the downside.”