June 2014

AILA President's message
David Lee

NIIS moves a step closer

I welcome the Federal Treasury’s release of a regulation impact statement (RIS) for the national injury insurance scheme (NIIS).

The COAG consultation RIS, prepared by PwC, focuses on “identifying the best way of providing lifetime care and support for all newly acquired catastrophic injuries due to motor vehicle accidents”.

The RIS notes that motor vehicle insurance and accident compensation schemes are the responsibility of state and territory governments, so the RIS contributes to jurisdictions’ consideration of the possible impact of changes to their motor vehicle accident schemes in the context of the proposed NIIS and the requirement for minimum benchmarks for providing no-fault lifetime care and support for those who sustain catastrophic injuries from a motor vehicle accident.

States and territories may conduct public consultation before enacting any changes to their schemes.

The NIIS, along with the National Disability Insurance Scheme, will support many Australians with significant and permanent disabilities, and their families and carers. They are very important schemes and I hope we will continue to see both implemented in a timely manner.

The Federal Government has not announced whether it intends to develop similar schemes for other risks, for example medical malpractice.


High Court hearings

The High Court has not yet heard the special leave application in the Great Southern case (Moore v Chubb). It was initially listed for hearing on March 14 but has been stood over to a date to be fixed.

The decision could have major ramifications for the industry, which is waiting to see if the High Court agrees to hear the appeal and, if so, whether it follows the NZ Supreme Court’s lead in Bridgecorp.

The High Court appeal for Maxwell v Highway Hauliers will be heard by the Full Court, although a date has not yet been announced. The insurer has lodged submissions with the High Court registry. Click here to access the document.

That decision will have significant ramifications for the use of section 54 of the Insurance Contracts Act 1984, which did not receive any revisions in the Insurance Contracts Amendment Act. See Resolve’s article on the IC Act amendments which features enlightening comments from Melbourne barrister John Tesarsch.


Market movements

There has been considerable movement in the insurance market of late.

ACCC has approved IAG’s proposed purchase of Wesfarmers’ underwriting business and, across the Tasman, the New Zealand Commerce Commission has cleared its acquisition of Wesfarmers' Lumley Insurance business. The deal remains subject to NZ Reserve Bank approval. NZ’s Overseas Investment Office issued its consent in March. In Australia, approvals are pending from APRA and the Federal Treasurer.

US-based broker Arthur J Gallagher has bought Wesfarmers brokerage operations for $1 billion, which will make it one of Australasia's biggest brokers.

The transaction, which includes the Oamps businesses in Australia and the United Kingdom, Crombie Lockwood in NZ, and associated premium funding operations, is subject to regulatory approval and expected to close by June 30.


Cyclone Ita damage minimal

North Queensland has dodged a bullet with no significant amount of insured losses from April’s Tropical Cyclone Ita.

ICA declared a catastrophe in Ita-affected parts of north Queensland. ICA CEO Rob Whelan said the council had established a taskforce to help coordinate the recovery process and initiated its disaster hotline as a service to affected policyholders.

The cyclone, which began as a category four storm but was downgraded to category one once it moved inland, brought floods, the ABC reported.

Luckily, major flooding did not occur and losses were relatively minor.


Financial system inquiry submissions

The financial system inquiry is in progress, with many submissions received from industry bodies and organisations.

ICA told the inquiry it wants more efficient industry regulation, less restrictive prudential requirements and significant tax reform to improve the sector's contribution to Australia's economy.

The Financial Services Council is seeking legislative change to introduce a seven-year limit on group insurance disability claims, in response to the life sector's flagging profitability.

Law firm Minter Ellison has suggested all financial services regulation come under one regulator, proposing a removal of duplications in ASIC and APRA's roles.

You can access key submissions here.


NZ quake class actions

The 2011 earthquake in Christchurch has resulted in two class actions being launched. NZ Government-owned claims settlement company Southern Response Earthquake Services Ltd (SRES) faces a class action lawsuit from a consumer action group for alleged breach of contract for "unjustifiable delays" in processing and settling claims.

The group, Honour Your Promise Action (HYPA), said it would work with class action firm GCA Lawyers. HYPA was formed for policyholders who believed SRES had "ignored and misled" them.

NZ law firm Anthony Harper is taking action against the NZ Government's Earthquake Commission for its handling of Canterbury’s rebuild. NZ publication The Press reported more than 120 homeowners were taking part in the action, which would be filed in the NZ High Court.


Flight MH370 disappears

The tragic loss of Malaysian Airlines flight MH370 has created despair and uncertainty for the families and friends of those on board.

In March, Allianz and co-insurers on Malaysia Airlines' aviation hull and liability policy started paying claims to victims’ families. German business daily Handelsblatt reported Allianz expected the consortium to pay about $A110 million for the aircraft and the 239 people on board.

Standard & Poor's Ratings Services (S&P) estimated insured losses at $A269 million to $A484 million, depending on potential court settlements.

S&P said the plane's loss was unlikely to trigger material changes in global aviation insurance pricing but could result in claims from three policy types – commercial airline all risks cover; war and political risks; and product liability.


See you on Hamilton

I urge all members to register for this year’s AILA conference, Shifting Sands. It features former High Court judge Michael Kirby AC CMG as keynote speaker. The conference is on Hamilton Island on September 17-19.

It looks to be a great event. I look forward to seeing you there.