ACT Chief Minister Jon Stanhope has a law degree and has spent most of his career as a political apparatchik. The fact that he doesn’t have a background in business is fairly obvious when you reflect on his latest pronouncements regarding insurance. He said last week there is little justification for increases in insurance premiums.

Mr Stanhope has released a report on the insurance industry in the ACT which offers a comparison between the cost of claims and the amount of premiums across a range of insurance sectors, including motor vehicle, mortgage and professional indemnity.

The report shows that residents and businesses in the ACT paid out nearly $300 million in premiums in the past year, with claims of just under $200 million.

That would be all very well if insurance was that simple. As Insurance Council of Australia Deputy CEO Dallas Booth pointed out yesterday, a comparison of premiums collected with claims paid in any one year is misleading, in terms of profit and the level of risk being covered.

“For example, with classes of insurance like public liability, professional indemnity, employers’ liability (workers’ compensation) and compulsory third party motor, claims can be made up to 10 years after the policy was taken out.”

Mr Booth says the ACT Government would have been better off waiting for comprehensive statistics from the Australian Prudential Regulation Authority to get an accurate picture of what is happening in the insurance market.