The ACT Government is considering whether certain policy and regulatory changes could bring down insurance premiums. Photo: Yuri Acurs.
The ACT Government will assess whether capping personal injury claims and legal fees will reduce premiums in response to an inquiry examining why Canberra’s insurance costs are so high.
The committee inquiry made 21 recommendations after examining some of the most common types of insurance used by businesses and the not-for-profit sector: workers’ compensation insurance, public liability insurance, strata title insurance and motor vehicle insurance.
These recommendations included that the ACT Government should determine whether introducing caps on personal injury claims was likely to reduce premiums.
“The challenge of regulation in the insurance industry is that it is necessary to protect the financial system and consumers, but often its complexity can increase the cost of premiums, increase costs for customers and disproportionately impact smaller jurisdictions,” the committee noted.
“The committee is concerned that insurance premiums have risen to the extent that they are threatening the viability of businesses and community organisations.”
Another recommendation was to examine whether introducing a statutory cap on legal fees would also help reduce premiums.
Unlike other jurisdictions, such a limit on how much lawyers can charge for conducting liability claims doesn’t exist in the ACT.
The committee also wanted the ACT Government to amend regulations around ‘no win no fee’ legal service advertising to require a disclosure that claimants are required to pay disbursements and potentially third-party costs, regardless of the outcome of their claim.
“The committee does agree that balance is required to discourage less definite claims and is concerned by potentially misleading ‘no win no fee’ advertising,” the report noted.
“Use of the phrase can be misleading or deceptive, and that adding a disclaimer could improve clarity for clients.”
The ACT Government has now responded to the report, agreeing in principle to look into whether caps on legal fees and personal injury claims would be likely to reduce premiums.
“However, it is noted that any future legislative or major policy reform would need to undergo separate policy considerations, including consultation and Budget processes, before the government could commit to making the change,” it noted.
This has rung alarm bells for some lawyers who represent injured Canberrans, stating making such changes would leave people worse off.
Australia Lawyers Alliance ACT director Amber Wang said compensation caps could erode people’s rights and reduce financial support.
“To penalise an injured person by arbitrarily limiting the compensation they receive is unfair,” she said.
“When someone has been injured through no fault of their own, we must prioritise supporting their recovery and restoring their quality of life as best we can.
“We look forward to being part of [any] consultation process, as we are uniquely placed to speak collectively about our clients’ experiences and can explain how eroding compensation rights would cause them significant harm.”
Ms Wang also questioned how capping legal fees would reduce insurance premiums.
“Is it proposed that insurers’ lawyers will have their fees capped, or only lawyers representing injured Canberrans?” she asked.
“The potential for a power imbalance between a well-resourced insurer and an injured person struggling to secure legal representation is obvious.
“The ACT is a model jurisdiction which proudly respects human rights, and the ALA urges the government not to dilute that reputation.”
The ACT Government stated it would also review the impact of restricting ‘no win no fee’ advertising in other jurisdictions, and examining whether such reform in the ACT would be “practicable and effective”.
It will also look at proportional liability arrangements in relation to workers’ compensation.
The government did not agree to recommendations calling on it to explore evidence-based policy options to cap insurance premium increases (as these are underwritten by commercial insurers and regulated by the Commonwealth), establish an insurance literacy program for small businesses and community organisations or look into setting up an insurance comparator website.
It agreed to one recommendation – to “revisit its $20 million public liability requirement” and consider levels of cover at a case-by-case basis – as this is already government policy.
“There is no blanket requirement for entities engaging with the Territory to hold $20 million in public liability insurance cover,” the government stated.
“The government will continue to raise government contract manager awareness of procurement policy, and the processes for assessing risk, in relation to public liability insurance.”
