A global firm that provides technical services for insurance companies is calling on industry stakeholders in Australia to consider a statutory scheme for public liability insurance. Executives from Xceedance argue that a statutory scheme could ease public liability’s availability and affordability issues.
In a blog post and a media release, the executives said a scheme modelled on current compulsory third party (CTP) motor vehicle insurance and workers’ compensation could be the way forward.
Insurance Business asked Sydney-based Prateek Vijayvergia (pictured above), Xceedance business leader in Australia, if the issues facing public liability insurance are really any worse than those facing other insurance lines like cyber or directors and officers (D&O)?
“Yes, the hardening market affects all sectors but classes like cyber and D&O are a matter for individual businesses to decide whether or not they want to purchase cover,” he said. “But businesses, particularly SMEs, and organisations like sporting bodies and community groups cannot operate without public liability insurance.”
Vijayvergia referred to A Stronger NSW, the policy document released by the Insurance Council of Australia (ICA) for the State election in March. In this document, he said, the ICA referred to the continuing hardening of the public liability insurance market and availability issues for SMEs in sectors including hospitality, entertainment and tourism.
“Insurers have struggled to maintain profitability of public liability insurance over the past three years, often experiencing combined loss ratios of more than 100%,” said the ICA in the document.
Vijayvergia also referred to recent statistics from the Australian Prudential Regulation Authority (APRA) to show “how bad the problem is” in the public liability space.
APRA’s National Claims and Policy Database (NCPD) analysis was released in May. The report “Review of claims trends and affordability of public liability and professional indemnity insurance in Australia,” referred to “concerns surrounding the affordability and availability of public liability insurance, professional indemnity and directors and officers” and “significant growth in premium in recent years.”
The report said public liability premiums went up by 40% between 2015 and 2021.
Vijayvergia said a statutory public liability scheme would likely:
“A statutory scheme could help injured people return to normality quicker, with an emphasis on rehabilitation not just compensation,” he said.
IB asked Vijayvergia about another statutory scheme already in place: icare, the state-run insurance corporation that provides workplace injury insurance. In August ABC news reported that the NSW government was “forced to spend another $1.9 billion on bailing out the scandal-plagued state insurance scheme.”
“This is not a comment on icare specifically, but any statutory scheme is only as good as the underpinning legislation,” said Vijayvergia. “A scheme must be carefully designed to ensure it is viable, sustainable, affordable and delivered efficiently.”
He said there is always a need for balance.
“Litigating a claim and waiting years for compensation may (or may not) see a claimant get more money than could be achieved under a statutory scheme,” said Vijayvergia. “With defined benefits under a statutory scheme, a claimant is aware, once their injury is assessed, of what their compensation level will be and can be paid faster and make a start on getting their life back to normal.”
He said his firm’s intent it to “open the debate on whether a statutory scheme or schemes is the right answer to the public liability issues confronting Australian businesses and community organisations.”
In 2021, Glenn Ross, CEO of MECON Insurance, called for a similar statutory scheme where the cost of claims would be compensated by the government.
“We’re being crushed in the liability space due to the frequency of bodily injuries and the increase in size of the average worker to worker claims. The bottom line is that there isn’t enough money to sustain these claims,” said Ross, whose company offers a range of construction industry insurance products.
Ross said the issue goes beyond his construction sector.
“Our small businesses, schools, council, sports clubs, and popular tourist spots are facing financial collapse from a single accident or are governed by tight rules and regulations through the fear of a lawsuit,” he said.
Ross looked to New Zealand for a possible model. He said that country’s Accident Compensation Corporation (ACC) provides compulsory insurance cover for personal injury for employees, paid for by a uniform levy on all workers.
The Australian Small Business and Family Enterprise Ombudsman has also raised the issue. In 2020, the then Ombudsman Kate Carnell released an Insurance Inquiry report.
“Our Insurance Inquiry has revealed we are in the grip of a national crisis that is killing small businesses,” said Carnell.
What do you see as the answer to the challenges facing the public liability insurance space? Please tell us below