ACIS Founding Chairman Dr Ian Enright was asked by Insurance Business Australia to contribute his thoughts on the impact of the 2023-2024 Federal Budget on the insurance industry. The Insurance Business Australia article is available here. You can read Ian’s full article below.
Insurance Perspectives on the 2023-2024 Federal Budget
By Dr Ian Enright
The first real budget of this first-term government needed to balance dampening inflation against some relief for the cost-of-living crisis. Any temptation for structural change was likely removed by the size of the net government debt and the omnipresent fear of criticism for being poor money managers. It is a cautious budget and is attracting criticism for it. The difficulty noted by Rod Sims (in the context of the petroleum resource rent tax) is that: “If the government does not want to tax the high profits of the gas industry in a stronger way it will be hard to convince other sectors that they should pay more tax.”
There is little of direct relevance to insurance customers or the insurance sector, other than the macro factors in the economy that affect every industry and its customers.
There seems to be nothing, other than the cost-of-living measures ($14.6 billion), which would affect affordability and availability of insurance. Any impact will be minimal. The cost-of-living measures are focussed on reducing the costs of essential goods and services for those on lower incomes. The measures lower the poverty rate from around 13.6% to 13.3% of the population – lifting around 80,000 people out of poverty. Australian living standards measured by gross domestic product are set to go backwards in 2023–24 as total GDP grows by an unusually low 1.5% while Australia’s population grows by 1.7%, producing a so-called “per capita recession”.
The budget infrastructure program highlights port development, urban renewal and urban development. The program is dominated by funding for transport and for the Olympics and Paralympics. There is funding in the budget to improve emergency early warning systems. The Insurance Council of Australia (ICA) notes the budget’s commitment “to fund disaster resilience and measures to better protect Australian communities from extreme weather” and comments that: “insurance catastrophe claims costs from last year now hitting nearly $7 billion, much more will need to be done.” The ICA will continue to advocate for the funding to the Disaster Ready Fund (DRF) to be indexed and for it to run as a ten-year, rolling program. The Hazards Insurance Partnership informs future investments of the DRF and outlines a natural hazard risk database for Australia. It is necessary for these linked programs to be enhanced. There will be disappointment that the infrastructure program does not include more targeted infrastructure, capability or resilience to mitigate natural disasters.
There is some funding to help small business build resilience to cyber threats by undergoing Council of Small Business Organisations Australia (COSBOA) training for in-house cyber experts. This is a part of $101.6 million over five years from 2022–23 to support and uplift cyber security in Australia, including $19.5 million over the next 12 months to improve the security of critical infrastructure assets and help businesses respond to significant cyber attacks.
The tobacco excise is to be increased by 5% a year for three years which will brighten the outlook for the life insurance sector without having a substantial immediate impact on premiums or claims.
The ICA has welcomed the government’s commitment to introduce legislation to ensure tax law is aligned with accounting standards and minimise the regulatory burden on general insurers.
One omission from the current budget that must be addressed is the absence of proper provision for remediation of ACBF/Youpla losses. A comprehensive and long-term series of government and regulatory failures enabled the Aboriginal Community Benefit Fund (ACBF) later named Youpla to flourish by selling life insurance policies into remote First Nations communities for about 30 years. It was always a private business run for the profit of its shareholders and associated entities. Its flagrant illegalities were overlooked or ignored by Government, Treasury, the ATO, APRA, ASIC and Fair Trading regulators. On its collapse and voluntary liquidation in March 2022, an estimated 30,000 First Nations Australians lost an estimated $300 million in premium and claims. Another sequence of Government and regulatory failures means that the liquidation is unlikely to produce any material dividend for the First Nations policyholder creditors. The Australian Government committed interim emergency funding, limited to policyholders as at 1 April 2020, so that a small number of the bereaved could bury their dead. By March 2022 an estimated $1.4 million funding had been provided for 149 burials. The number now is 200 burials. The Government promised an enduring solution by November 2023 when the interim scheme terminates. The Strong Mob Debt Coalition, the peak voice to Government on the matter, notes that no provision for compensation or remediation has been made in the current Federal Budget.
Dr Ian Enright, ACIS Founding Chairman
ACIS Founding Chairman Dr Ian Enright is a company director, senior insurance executive, lawyer, academic and author who was an independent expert and insurance adviser to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. His book, Professional Indemnity Insurance Law, was described when he was awarded the British Insurance Law Association Book Prize as “the most notable contribution to literature in the field of law as it affects insurance”. Dr Enright and Professor Robert Merkin KC are the authors of Sutton on Insurance Law. He advises government, regulators and insurance industry bodies on regulation and policy matters.
ACIS Co-founders finalise third edition of Professional Indemnity Insurance Law
/in Uncategorized /by Will ArcherACIS Co-founders Dr Ian Enright and Professor Robert Merkin KC have finalised the third edition of longstanding publication Professional Indemnity Insurance Law (published by Sweet & Maxwell / Thomson Reuters in December).
Cited in courts and leading commentaries in Australia and in the United Kingdom, Professional Indemnity Insurance Law takes an analytical and solutions-based approach to explain the extent to which professionals are covered for different liabilities. The second edition was awarded the 2008 British Insurance Law Association Book Prize and was described as “the most notable contribution to literature in the field of law as it affects insurance”.
Following their collaboration on the fourth edition of Sutton on Insurance Law, Dr Enright and Professor Merkin KC have now completed a significant update and substantial restructure of Professional Indemnity Insurance Law. The new edition provides commentary on key cases and the evolving law, and continues and enhances the previous editions’ consideration of relevant clauses from modern and traditional policy wordings.
Overview
For more details on the publication, see the Thomson Reuters page.
About the authors
Dr Ian Enright is a lawyer, academic and author who was an independent expert and insurance adviser to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. He was awarded the 2008 British Insurance Law Association Book Prize for the second edition of Professional Indemnity Insurance Law, which was described as “the most notable contribution to literature in the field of law as it affects insurance”. He advises government, regulators and insurance industry bodies on regulation and policy matters.
Professor Robert Merkin KC is an international authority on insurance and re-insurance law with a long history of teaching and advising. He is Professor of Commercial Law at the Universities of Reading and Exeter in England, and Distinguished Professor in the School of Comparative Law at the China University of Politics and Law in Beijing.
Memorial Celebration for Greg Pynt
/in Uncategorized /by Will ArcherA special gathering for friends, colleagues and loved ones of Greg Pynt will take place at the Melbourne Hotel in Perth on Friday, 4 August 2023.
Please RSVP: events@aila.com.au or call 1300 699 140
You can also read the Australian Insurance Law Association‘s article about Greg Pynt here: https://lnkd.in/gSay_apn
In Memoriam Announcement
/in Uncategorized /by Will ArcherIt is with deep sadness that we announce the sudden passing of Greg Pynt on Sunday, 23 July 2023.
Greg Pynt was a co-founder and Board Member of the Australian College of Insurance Studies, a barrister and a mediator who had taught insurance law at the University of Western Australia since 1991. Greg authored Australian Insurance Law: A First Reference, now in its fourth edition, and he was the general editor of the Insurance Law Journal and an Honorary Fellow at the University of Western Australia.
He had strong ties to the Australian Insurance Law Association, where he was former National Board Member, WA State Committee Member and State President, AILA life Membership recipient and AILA Insurance Law Prize holder.
Greg led our Principles and Practice of General Insurance Law course at the University of Western Australia and the associated WA Sir Ninian Stephen Insurance Law Masterclass (Insurance Gangnam Style), which took place in Perth last week.
Greg was a highly respected authority in the insurance law community, a passionate teacher, and a wonderful colleague who was known for his sage counsel and sparkling wit. He will be greatly missed by his ACIS colleagues.
Our thoughts are with Greg’s family and friends.
Gareth Horne on AFCA’s first COVID-19 BI complaints decisions
/in Uncategorized /by Will ArcherACIS faculty member Gareth Horne has provided his analysis of AFCA’s first COVID-19 BI complaints decisions.
You can read the Insurance Business Australia article here.
CPD Enrolment Open: Principles and Practice of General Insurance Law
/in Uncategorized /by Will ArcherCPD enrolment is open for our Principles and Practice of General Insurance Law course at the University of Western Australia.
Course dates: 17-20 July 2023 (4-day intensive course)
CPD/Executive Education enrolment deadline: 10 July 2023
Mode of delivery: on campus at the University of Western Australia or live attendance via online classroom (interstate CPD students)
Course focus: The course focuses on the statutes and common law principles regulating insurance law. It is designed for anyone who intends to connect, work, advise or advance within the insurance industry.
For more information, see the ACIS course information table.
CPD enrolment is via the UWA Law School Eventbrite page.
Review of the 2023-2024 Federal Budget
/in Uncategorized /by Will ArcherACIS Founding Chairman Dr Ian Enright was asked by Insurance Business Australia to contribute his thoughts on the impact of the 2023-2024 Federal Budget on the insurance industry. The Insurance Business Australia article is available here. You can read Ian’s full article below.
Insurance Perspectives on the 2023-2024 Federal Budget
By Dr Ian Enright
The first real budget of this first-term government needed to balance dampening inflation against some relief for the cost-of-living crisis. Any temptation for structural change was likely removed by the size of the net government debt and the omnipresent fear of criticism for being poor money managers. It is a cautious budget and is attracting criticism for it. The difficulty noted by Rod Sims (in the context of the petroleum resource rent tax) is that: “If the government does not want to tax the high profits of the gas industry in a stronger way it will be hard to convince other sectors that they should pay more tax.”
There is little of direct relevance to insurance customers or the insurance sector, other than the macro factors in the economy that affect every industry and its customers.
There seems to be nothing, other than the cost-of-living measures ($14.6 billion), which would affect affordability and availability of insurance. Any impact will be minimal. The cost-of-living measures are focussed on reducing the costs of essential goods and services for those on lower incomes. The measures lower the poverty rate from around 13.6% to 13.3% of the population – lifting around 80,000 people out of poverty. Australian living standards measured by gross domestic product are set to go backwards in 2023–24 as total GDP grows by an unusually low 1.5% while Australia’s population grows by 1.7%, producing a so-called “per capita recession”.
The budget infrastructure program highlights port development, urban renewal and urban development. The program is dominated by funding for transport and for the Olympics and Paralympics. There is funding in the budget to improve emergency early warning systems. The Insurance Council of Australia (ICA) notes the budget’s commitment “to fund disaster resilience and measures to better protect Australian communities from extreme weather” and comments that: “insurance catastrophe claims costs from last year now hitting nearly $7 billion, much more will need to be done.” The ICA will continue to advocate for the funding to the Disaster Ready Fund (DRF) to be indexed and for it to run as a ten-year, rolling program. The Hazards Insurance Partnership informs future investments of the DRF and outlines a natural hazard risk database for Australia. It is necessary for these linked programs to be enhanced. There will be disappointment that the infrastructure program does not include more targeted infrastructure, capability or resilience to mitigate natural disasters.
There is some funding to help small business build resilience to cyber threats by undergoing Council of Small Business Organisations Australia (COSBOA) training for in-house cyber experts. This is a part of $101.6 million over five years from 2022–23 to support and uplift cyber security in Australia, including $19.5 million over the next 12 months to improve the security of critical infrastructure assets and help businesses respond to significant cyber attacks.
The tobacco excise is to be increased by 5% a year for three years which will brighten the outlook for the life insurance sector without having a substantial immediate impact on premiums or claims.
The ICA has welcomed the government’s commitment to introduce legislation to ensure tax law is aligned with accounting standards and minimise the regulatory burden on general insurers.
One omission from the current budget that must be addressed is the absence of proper provision for remediation of ACBF/Youpla losses. A comprehensive and long-term series of government and regulatory failures enabled the Aboriginal Community Benefit Fund (ACBF) later named Youpla to flourish by selling life insurance policies into remote First Nations communities for about 30 years. It was always a private business run for the profit of its shareholders and associated entities. Its flagrant illegalities were overlooked or ignored by Government, Treasury, the ATO, APRA, ASIC and Fair Trading regulators. On its collapse and voluntary liquidation in March 2022, an estimated 30,000 First Nations Australians lost an estimated $300 million in premium and claims. Another sequence of Government and regulatory failures means that the liquidation is unlikely to produce any material dividend for the First Nations policyholder creditors. The Australian Government committed interim emergency funding, limited to policyholders as at 1 April 2020, so that a small number of the bereaved could bury their dead. By March 2022 an estimated $1.4 million funding had been provided for 149 burials. The number now is 200 burials. The Government promised an enduring solution by November 2023 when the interim scheme terminates. The Strong Mob Debt Coalition, the peak voice to Government on the matter, notes that no provision for compensation or remediation has been made in the current Federal Budget.
Dr Ian Enright, ACIS Founding Chairman
ACIS Founding Chairman Dr Ian Enright is a company director, senior insurance executive, lawyer, academic and author who was an independent expert and insurance adviser to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. His book, Professional Indemnity Insurance Law, was described when he was awarded the British Insurance Law Association Book Prize as “the most notable contribution to literature in the field of law as it affects insurance”. Dr Enright and Professor Robert Merkin KC are the authors of Sutton on Insurance Law. He advises government, regulators and insurance industry bodies on regulation and policy matters.
Review of the Reserve Bank of Australia: An RBA Fit for the Future
/in Uncategorized /by Will ArcherACIS Founding Chairman Dr Ian Enright was asked by Insurance Business Australia to contribute his thoughts on the impact of the RBA Review on the insurance industry. The Insurance Business Australia article is available here. You can read Ian’s full article below.
Analysis of Insurance Issues
By Dr Ian Enright
The interest rate set by the Reserve Bank of Australia (RBA) implements monetary policy and it is a critical feature of Australia’s economic policy. The other critical features are fiscal policy and, particularly for the insurance industry, the development of national infrastructure (the built environment, planning and resilience are all part of infrastructure policy). The changed interactions of monetary, fiscal and infrastructure policy will be a complex and important outcome of the Review of the RBA.
The interest rate is important for the insurance industry, for policyholders and for suppliers. It affects premium rating, premium funding, financial limits and reserving, among other aspects of insurance. An increasing interest rate can effectively erode the cover provided by a policy as the cost of restoring the loss or damage increases. It can also reduce the commutation values of a portfolio or the value of longer-term benefits in income protection products and the newer marques of disability covers.
The Federal Government’s endorsement of the Review of the Reserve Bank recommendations does not directly affect the interest rate. But that is not the whole story. The Review recommends, and the Government accepts, two fundamental changes to the RBA’s framework: its charter (engraved in granite in Martin Place) and its governance. The charter for “economic prosperity and welfare of the people of Australia now and in the future” is to become an “overarching purpose”, not a separate objective for monetary policy. The Review states that the “economic prosperity” aspect of the current charter provides too much discretion to the RBA, and suggests the RBA’s focus should be on price stability and full employment. The governance framework will include a Governance Board (for oversight), a separate Monetary Policy Board, more diverse skill sets and more economic and financial market expertise on the Boards, and the removal of the government power to override the RBA.
There are two currently unanswered questions. The first concerns the change in the charter for economic prosperity. What will that mean in practice? Coombs and Fraser, former RBA Governors, stressed the importance of economic prosperity for all Australians. Coombs noted a view that the RBA was the “Peoples’ Bank” for correcting the inherent inequalities of the capitalist system. Fraser alerted us to the dangers of a monetary policy superimposed on a neoliberal economic system (that is, a system with low tax, low government services and high concessions for business). The RBA was intended to be an instrument for the creation and maintenance of a fairer society. Yet we are told that today economic inequality is surging:
The RBA sets a minimum unemployment level for the control of inflation. Wages for the employed are being structurally lowered. Economic equality is a great driver of social prosperity. Our economic prosperity depends on consumers buying and the poor are our best consumers. Will the change to the RBA charter and its governance produce any change on analysis or policy implementation here?
The second unanswered question concerns the governance changes. What changes might occur here? The RBA Governor dismisses the prospects of practical change. The raising of interest rates to combat inflation is a blunt instrument, particularly for supply-side inflation and particularly from increases in household energy costs and the disruption of international and national supply chains. The economist John Quiggin describes monetary policy targeting inflation by interest rate adjustments, despite being augmented by asset purchase (quantitative easing) and soft guidance, as a limited and failed tool. Could the governance changes and a more diverse skill set on the RBA Boards produce more timely data, a “richer suite of models and data”, better economic modelling and more targeted flexible monetary policy? The Review recommends that the cash rate should “remain the primary tool of monetary policy.” Or will our default position remain that when inflation rises, our poor who are the most adversely affected by inflation pay the largest price for the cure? With the result being a material transfer of wealth to our financial institutions?
So, there are a number of potential indirect effects of the Review changes for insurance. Firstly, if interest rates stay high or rise, and there is no other monetary tool to defeat inflation, premium costs will increase and so will claims costs. Secondly, insurance cover becomes worse value for money and more policyholders will lapse their policies, not renew or reduce their covers, which will lead to worsening underinsurance. Thirdly, if insurance customers perceive that our financial institutions are profiting from the misery of the cost-of-living crisis, there would be an erosion of the most valuable economic commodity of all. Trust.
Dr Ian Enright, ACIS Founding Chairman
ACIS Founding Chairman Dr Ian Enright is a company director, senior insurance executive, lawyer, academic and author who was an independent expert and insurance adviser to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. His book, Professional Indemnity Insurance Law, was described when he was awarded the British Insurance Law Association Book Prize as “the most notable contribution to literature in the field of law as it affects insurance”. Dr Enright and Professor Robert Merkin KC are the authors of Sutton on Insurance Law. He advises government, regulators and insurance industry bodies on regulation and policy matters.
Asia Insurance Review – ACIS Feature
/in Uncategorized /by Will ArcherACIS Founding Chairperson Dr Ian Enright has been featured in the March issue of the Asia Insurance Review. The article sets out how ACIS was established to support the changing industry, as well as the college’s future plans.
The article is available on the Asia Insurance Review website (with paid subscription only).
Dr Ian Enright on the Quality of Advice Review
/in Uncategorized /by Will ArcherACIS Founding Chairperson Dr Ian Enright has provided his evaluation of the Quality of Advice Review’s Final Report and Recommendations.
You can read the Insurance Business Australia article here.
Fred Hawke on the effects of gambling reform
/in Uncategorized /by Will ArcherACIS Board Member Fred Hawke has provided his analysis of the impact of gambling reform on commercial insurance coverage.
You can read the Insurance Business Australia article here.